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Time-of-Use versus Tiered Rates

If you’re a residential or small business customer that pays TOU electricity prices, you can choose to switch to Tiered prices....

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Customer Choice – Tiered vs Tiered Electricity Prices

Jun 4, 2020

Effective November 1, 2020, the government intends to introduce customer choice for Regulated Price Plan (RPP) customers who pay time-of-use (TOU) prices.

The government of Ontario is looking to the Ontario Energy Board to develop, in consultation with stakeholders as appropriate, the rules under which distributors will be required to offer their TOU customers the option to choose between TOU and tiered prices by November 1, 2020, so that Ontarians would be able to pick the electricity pricing approach that works best for them.

What’s the difference between TOU and tiered electricity rates?

TOU rates vary according to when electricity is used. They are cheapest when demand is lowest: during the evenings, on weekends and on holidays.

The TOU pricing periods are:

• Off-peak, when demand for electricity is typically lowest. Ontario households and small businesses typically use the majority of their electricity – nearly two thirds of it – during off-peak hours.

• Mid-peak, when demand for electricity is moderate. These periods are during the daytime, but not the busiest times of day.

• On-peak, when demand is generally highest. These are the busiest times of day – generally when people are cooking, starting up their computers and running heaters or air conditioners.

One of the purposes of TOU pricing is to give customers a financial incentive to reduce their electricity use during peak times. This helps to smooth out demand peaks and lowers overall system costs by reducing the need for more generation capacity.

A small percentage of customers (less than 5 per cent) are charged tiered prices. Tiered price customer either don’t have a smart electricity meter that can track the time of day electricity is used, or live in certain areas that do not have the communications infrastructure to electronically transmit consumption data.

Tiered prices are the same regardless of time of day but become more expensive if a customer’s overall electricity use goes above a set threshold. The current threshold for residential customers is 1000 kWh per month following a decision by the Ontario Energy Board on April 14th to not implement the summer threshold, which is 600kWh.

Click the link below for details as provided by the energy regulator, the Ontario Energy Board