Residential Rate Options

May 8, 2024

One of the more frequent conversations of NOTL Hydro’s customer service staff is educating customers on their different rate options.  There are currently three different rate options for residential and small business customers.  All three options are part of the Regulated Price Plan (RPP) of the Ontario Energy Board.

Time of Use

The default rate plan is Time of Use.  Customers are billed based on when they use the power.  The highest rates, currently 18.2¢/kwh, are at peak electricity usage times (On-peak) during the day in the summer and in mornings and early evenings in the winter.  The lowest rates, currently 8.7¢/kwh, are at low electricity usage times (Off-peak) in the late evenings, at night and on weekends and holidays.  The remaining Mid-peak times, currently 12.2¢/kwh, are during the day in the winter and in the mornings and early evenings in the summer.

The theory behind time of use rates is that they will encourage users to switch their power usage to the lower cost times and this will benefit the system as a whole as the generation of electricity is cheaper and more available at those times.  However, to truly be effective it is thought that the price differential must be much bigger than is currently the case to have an impact.  A multiple of at least 5 from the Off-peak to the On-peak is often cited, Otherwise, the savings are not sufficient enough to offset the inconvenience of changing habits for most customers. 

Tiered Rates

Tiered rates are more recent and were introduced by the government to provide an alternative to those who did not want time of use rates.  There is one rate, currently 10.3¢/kwh, for the first block of usage in a month and a second rate, currently 12.5¢/kwh, for any consumption above that.  The monthly blocks for Tier 1 rates are 600 kwh in the summer and 1,000 kwh in the winter for residential customers.  The winter block is higher so as to not penalize those who use electricity for heating.

The introduction of the tiered rates was a political decision driven by the Government.  It potentially negated much of the cost and effort in installing smart meters. If you object to being guided by the government as to when to use electricity, if your lifestyle, such as working from home, does not allow the altering of when you use electricity or if you do not want to worry about when you use electricity this is the rate structure for you.  Whether having this rate option will be the right decision in the future if the demand for electricity rises and meeting demand becomes a challenge remains to be seen.

Ultra Low Overnight Rates

Ultra Low overnight rates are a more recent introduction and are designed for customers with electric vehicles who can charge them at night.  The offset to the very low overnight rate, currently 2.8¢/kwh, is a very high On-peak rate, currently 28.6¢/kwh, in the early evenings on weekdays.  The Mid-peak and weekend Off-peak rates are the same as with regular time of use rates.

Only customers with very high overnight usage, such as regularly charging an electric vehicle, would benefit from these rates as the very high On-peak rates would otherwise drive up the total cost.

OEB Calculator

If you are unsure which rate plan is right for you there is a calculator on the Ontario Energy Board website.  It cannot capture all the intricacies of the rates but does enough to provide some guidance.  You will find that there is generally not much difference between the Time of Use and Tiered Rates and that the Ultra Low Overnight rate is much more expensive unless you have high nighttime usage.

https://www.oeb.ca/_html/calculator/en/electricity/res/#

Retailers

There is a fourth option and that is to use the services of a retailer.  They can provide you with their own pricing scheme.  Not many residential customers use retailers anymore as the customers are still subject to paying Global Adjustment.  As the Global Adjustment can be 80% of the cost of electricity, as per the yellow in the chart below from the IESO website, this is not a viable alternative.

Hourly Time of Use

For large customers, the cost of electricity is usually the actual hourly price plus the Global Adjustment.  The chart above provides the average weighted hourly price but large customers are charged based on their actual usage each hour.  The RPP prices discussed above are estimated each year based on a forecast of the hourly price and global adjustment.  Historically, as per the chart below, the RPP rates (in yellow) have been very close to the sum of the actual hourly price and the actual Global Adjustment.  RPP rates are reset each November.

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