Ontario’s New Hydro Rate Changes and Price Plan Options

The Ontario Society of Professional Engineers (OSPE) would like to caution the public to make sure they do not ask to switch to the Tiered Price Plan before they have checked to make sure their bill will not rise after the switch. 

The Ontario Energy Board (OEB) announced new rates as of November 1, 2020 for its two regulated price plans (RPP) for consumers who buy their electricity from their local distribution utility (eg: Toronto Hydro, Alectra Utilities, Hydro One, etc.).

The two plans are the Time of Use (TOU) Price Plan and Tiered Price Plan. The TOU Price Plan is currently used by over 90% of residential and small business consumers. The Tiered Price Plan is currently used by about 5% of consumers who do not have smart meters that can be read remotely by the local utility computers. The remaining consumers buy electricity from a retailer at contracted rates.

The OEB has information on its website about the rate change, who is able to switch price plans and when. OSPE recommends that all TOU consumers who are planning to switch to the Tiered Price Plan:

The OEB software will calculate your bill automatically using the new rates if you identify which local distribution company you buy your electricity from and if you enter your monthly bill consumption either one month at a time or the whole year all at once. The calculator will also tell you the difference in price between the two plans. OSPE strongly recommends you use the OEB bill calculator before you decide to switch plans.

Why is it important to check with the OEB bill calculator before you switch? 

The price plan rates have been set to recover the cost of electricity based on a typical consumer’s total usage and hourly consumption pattern

For the TOU Price Plan, the typical residential consumer uses 700 kWh of electricity on average each month of the year and uses 18% of their electricity On-peak, 18% Mid-peak and 64% Off-peak. That typical consumer with the TOU Price Plan will pay 13.4 cents/kWh for electricity over the whole year. 

For the Tiered Price Plan, the typical residential consumer uses 700 kWh of electricity on average each month and uses 61% of that energy below the summer and winter low price consumption thresholds. The low rate threshold is 600 kWh for the summer and 1000 kWh for the winter. Beyond that consumption level each month the higher price takes effect on the additional electricity used. That typical consumer with the Tiered Price Plan will also pay 13.4 cents/kWh for electricity over the whole year. 

If your consumption level and hourly pattern matches the typical consumer then the two rate plans will be approximately the same price within a dollar or two a month. However, if a specific consumer has an overall consumption or hourly pattern that is significantly different from the typical consumer then when they switch from the TOU to the Tiered Price Plan their bill could rise or fall significantly.

Remember that the TOU Price Plan is designed to reward consumers who use more of their electricity off-peak when it costs less to make electricity. The Tiered Price Plan is designed to reward consumers who use less electricity each month regardless of when it is used.

Giving consumers the choice to switch to Tiered Rates may have three negative impacts.  If consumers who switch to the Tiered Price Plan begin to use more of their electricity during peak hours, the power system will need more peaking capacity. That peaking capacity is likely to be fueled in part by natural gas which emits carbon dioxide. We could also have more surplus clean electricity at night that may be discarded. Those impacts will cause the price of electricity and emissions to rise.

OSPE recommended to the Ontario government in April 2019 that a better option is let people volunteer for an optional price plan that allows them to get surplus clean electricity that is available between midnight and 6 am at very low prices. That electricity is sold to New York, Michigan and Quebec at prices under 1 cent/kWh. OSPE believes it would be better if we had a voluntary special TOU price plan that provided a 4th price period at the very low export rate from midnight to 6 am. Ontario consumers could then use that cheap and clean electricity to charge their electric vehicles and displace some of their fossil fuels used for hot water and space heating by purchasing a duel electric-fossil fuel furnace with a smart controller to use clean electricity for heating when available. Industry could also use that clean surplus electricity at those low prices to make low cost clean hydrogen for industrial use or to power the new fuel cell vehicles that will be introduced in Ontario in the near future. Ontario consumers would then benefit from lower fossil fuel bills and lower emissions.

What should you do?

Use the OEB bill calculator to determine your bill impact before you decide to switch price plans. If you are unable to use the OEB bill calculator, speak to your local distribution utility to see if your bill will increase based on your specific consumption history.

If you have a low income, apply for the low-income support programs. Those rebates are designed to reduce your electricity bill by up to about 80% if you qualify as a low-income resident (1-person household under $28,000/yr and up to 5-person household under $52,000/yr). There are also emergency one time funds to pay overdue bills if you qualify.

This Post Has One Comment

  1. Norman

    Why doesn’t Hydro1 calculate my bill using TOU, and TIERED PRICE PLAN, and apply the lower price to me? It’s way too complicated for consumers to figure this out. Then you wouldn’t have people switching their price plans, thinking they are helping themselves, only to be burned in the end by a higher bill. Why leave this switching decision to the consumer when you (Hydro1) have all the information at your fingertips?

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