A proposed discount interval for Ontario’s time-of-use electricity rates could introduce ultra-low pricing for power consumption during overnight hours with a corresponding added premium during the on-peak periods of the day. Energy Minister Todd Smith has instructed the Ontario Energy Board (OEB) to assess the logistical requirements and financial implications of this envisioned voluntary time-of-use option and report back by April 1. The proposal has also been posted on Ontario’s Environmental Registry for public comment until March 29.

As outlined, three objectives underpin the initiative:

• Providing more choice for residential, small business and farm customers subject to Ontario’s regulated price plan (RPP);
• Increasing the efficiency of the electricity system if loads can be shifted to off-peak hours and reducing requirements for new infrastructure to meet peak demand; and
• Supporting decarbonization through reduced demand for the natural gas-fired generation that typically goes online during peak demand periods.

A 2015 OEB pilot program, which offered select residential customers the option for ultra-low overnight prices in tandem with a higher on-peak price, is identified as a guiding model. Both Smith’s instructions to the OEB and the Environmental Registry also cite the 2020 meta-analysis of the regulated price plan, which concluded that revised overnight electricity rates could help encourage emissions-reducing behaviour.

“Over the coming years, electrification of emissions-intensive sectors is expected to provide opportunities to reduce province-wide emissions. This trend will also put pressure on the electricity grid. There is an opportunity to consider new rate designs that could anticipate increased electrification and support the decarbonization of the economy,” Smith states.

Supporters of the proposal maintain it would give Ontario residents a de facto “right of first refusal” on the surplus baseload generation that has long been exported at a loss to the United States during the hours when supply outstrips provincial demand. An overnight electricity discount could also improve the economics of charging electric vehicles (EVs) and/or large batteries used for energy storage, while associated higher on-peak rates could strengthen the case for solar generation.

“I think it is a step in the right direction. It is better to let Ontarians have the electricity at a deep discount during this time than to pay the U.S. to take it,” says Bala Gnanam, vice president, sustainability, advocacy and stakeholder relations with the Building Owners and Managers Association (BOMA) of Canada and a member of the Independent Electricity System Operator’s (IESO) stakeholder advisory committee. “Beyond EVs, I am hopeful that this would spur adoption of residential energy storage technologies.”

“The U.S. has had a sweetheart deal for years for the surplus power that is sold out-of-province at a negative price,” concurs Scott Rouse, managing partner with the consulting firm, Energy@Work. “This could be an investment in energy efficiency that delivers cheaper electricity and sustained environmental improvements.”

As part of its work, the OEB will be consulting stakeholders on specific proposed rate structures. The public consultation through the Environmental Registry is seeking general input on: measures that can influence load shifting; how proposed higher on-peak and ultra-low overnight prices could help integrate looming electricity demand from EVs and other technologies into the distribution system; and how to balance optimum rate signals with cost recovery requirements.

“There is a huge need to re-evaluate the off-peak pricing, as it has always been way too high and provided little motivation to shift to off-peak use,” submits Andrew Pride, an engineer and consultant specializing in energy management and conservation strategies. “The unpredictable nature of price signals is also a challenge for homeowners and businesses. The government has been changing the price signals throughout the past three years so there needs to be confidence that an ultra-low overnight rate will continue.”

Under Ontario’s three-interval time-of-use rates, RPP customers pay off-peak prices — currently set at 8.2 cents per kilowatt-hour — during the 12 hours from 7 p.m. to 7 a.m. The provincial government intends to have the new time-of-use rate scheme available by April 2023.