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Hydro proposal would double peak-time costs

Smart meters to monitor use
Price may vary with seasons

Toronto Star - November 30, 2004
by John Spears

A working group on electricity pricing in Ontario has examined an "illustrative chart" of a price scheme that would charge consumers prices ranging from 4 cents to 11 cents a kilowatt hour, depending on the time of day.

The top price in the example is more than double the price consumers pay now: Consumers pay 4.7 cents a kilowatt hour for the first 750 kilowatt hours they use each month, and 5.5 cents per kilowatt hour for the remainder.

The new prices would apply only to customers with "smart meters" that record the time of day that power is used, as well as the total amount consumed.

But Ontario Energy Minister Dwight Duncan has ordered utilities to push the installation of smart meters aggressively. Twenty per cent of electricity customers must have the meters by 2007, and everyone must have one by the end of 2010.

Customers without smart meters may still be charged "two-tier" prices, similar to the current system of 4.7 cents to 5.5 cents a kilowatt hour. But some working group members want to widen the difference between the tiers to 2 or 3 cents a kilowatt hour.

The working group is due to recommend a consumer pricing formula to the Ontario Energy Board, which in turn is expected to issue its own pricing proposal in a discussion paper in December.

The proceedings of the working group's latest meeting have been posted on the energy board's website. The group, which reports to the energy board, has members from a spectrum of electricity business and consumer groups.

It has hired Navigant Consulting to research pricing systems.

Meeting notes show that Navigant looked at two dozen jurisdictions that charge high rates during periods of peak demand for power, such as late afternoon and early evening, and lower rates when demand is low, such as overnight and on weekends. They then presented three examples to the working group.

All three systems split the day into three different periods of high, low and medium demand. The price in the medium demand period was double the price for the low demand period, while the high demand price was triple the low demand price. "All three topped out at about 18 cents a kilowatt hour," the meeting notes say, with the low-price period in one example at about 6 cents a kilowatt hour.

"Navigant also showed an illustrative chart for Ontario which was also based on three levels of time-of-use prices, and a similar 1:2:3 ratio in the price differentials (e.g. 4, 8, 11 cents a kilowatt hour)," according to the notes.

Prices could also vary from season to season, the notes say, with a higher price grid in place in summer and winter when demand is heavy, and lower prices in spring and fall when demand declines.

The working group is devising a pricing formula for consumers without smart meters. The government has ordered the energy board to have a plan in place by next May for a regulated consumer price that's stable but also covers the true cost of power.

Meeting notes indicate that the group is still looking closely at ways of modifying the current two-tier pricing system. Some working group members want the upper price to be 2 or 3 cents a kilowatt hour higher than the lower price (the current spread between the upper price of 5.5 cents a kilowatt hour and the lower price of 4.7 cents is only 0.8 of a cent). Increasing the price spread would encourage conservation, they argue.

Others point out that consumers with electric heating — most of whom have low incomes — have little leeway to cut their power use in the winter when their electric bills are highest.

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