Selected Ontario Utilities to Test New Electricity Pricing Options
On August 24, 2017, the Ontario Energy Board (OEB) announced that three Ontario electricity distributors will be implementing new electricity commodity pricing options for consumers who use the “Regulated Price Plan” (RPP). Among other things, the new pricing options will include “enhanced” Time-of-Use (TOU) pricing (where the price differential between TOU periods will be greater), as well as approaches where the cost of electricity will be reduced except for at very high-use times when the price will be much higher (called Critical Peak Price or CPP). The OEB plans to have the selected distributors test the new options with around 18,000 consumers. The OEB will evaluate the overall results of the pilot projects, and may make successful options available to all RPP consumers.
The newly announced RPP pilot projects are a key part of the OEB’s evaluation of how the RPP can be improved. As we described in an earlier post, the OEB's December 2015 Report on the Regulated Price Plan (RPP) Roadmap concluded that current TOU pricing is not providing sufficient incentives for consumers to shift and/or reduce their electricity consumption. In response, the OEB decided to consider alternative RPP approaches, starting with pilot projects that will test a variety of strategies. The OEB's July 2016 Regulated Price Plan Roadmap: Guideline for Pilot Projects on RPP Pricing (the Guideline) set out the OEB's objectives, identified priority treatments for price (and non-price) pilot projects, and laid out a framework for electricity distributors to design, implement and evaluate these pilot projects. Several large and medium sized electricity distributors applied to the OEB to implement RPP pilot projects, and the OEB has now selected Alectra Utilities, London Hydro and Oshawa PUC to implement the pilot projects.
The OEB’s August 24 Notice indicates that the OEB has approved the structure and pricing for six different RPP pricing pilots. The approved RPP pricing pilots will offer different electricity pricing using approaches that are meant to be revenue-neutral as compared to the current TOU pricing. The selected distributors may also apply to implement additional approaches.
Under the OEB-approved current TOU pricing, consumers pay 6.5¢/kWh in off-peak hours (evenings and weekends) and 9.5¢/kWh in mid-peak hours (morning and late afternoon in summer and midday in winter) and 13.5¢/kWh in on-peak hours (midday in summer and morning and late afternoon in winter). In contrast, the approved RPP pricing pilots include the following:
- Enhanced TOU – The ratio of pricing between on-peak and off-peak will increase from 2:1 to 4:1 and the ratio of mid-peak to off-peak will also increase. This will lower the current off-peak price to 4.4¢/kWh, and increase the on-peak price to 17.6¢/kWh.
- Low Overnight – There will be a very low price for the midnight to 6 a.m. period (2.0¢/kWh) while the on-peak price will be increased (to 18.4¢/kWh).
- Critical Peak Price (CPP) – Three different options will be offered where consumers pay a much higher price for four hours (likely 4 p.m. to 8 p.m.) during the top system peak days during the summer and winter. The CPP will be as much as 49.8¢/kWh, but other pricing will be reduced. Customers would be notified in advance of a CPP event, in order to adjust their consumption.
The three distributors selected by the OEB will now offer the RPP pricing pilot projects to interested consumers. The OEB has indicated that it will be closely monitoring the progress of the approved pilot projects, and will share the results “in due course.”