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Power pricing

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[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column width=”1/3″][vc_column_text disable_pattern=”true” align=”left” margin_bottom=”0″]What is “time-of-use” (TOU) pricing?

The Ontario Energy Board has been providing its customers with a chart that shows when it’s more or less expensive to use electricity for nearly a decade, and while it seems like it’s trying to help save money, it’s actually trying to use price as an incentive to encourage consumers to spread their use throughout the day to avoid peaks and valleys in energy demand. In the meantime, savvy consumers with access to time-of-use pricing can save money if they’re careful.

Hydro, nuclear and fossil fuel plants that generate baseload electricity (the point that meets the lowest level of demand for electricity a grid will get within a day) in Canada, can’t increase their output quickly. So, on a cool evening when few air conditioners are buzzing and offices are closed, baseload sources of electricity have no problem meeting demand. The next day when temperatures hit 33 C, things change.[/vc_column_text][/vc_column][vc_column width=”2/3″][mk_image src=”” image_width=”1000″ image_height=”1000″ crop=”true” lightbox=”false” frame_style=”simple” target=”_self” desc=”THINKSTOCK” caption_location=”inside-image” align=”left” margin_bottom=”10″][/vc_column][/vc_row][vc_row][vc_column width=”1/1″][vc_column_text disable_pattern=”true” align=”left” margin_bottom=”0″]Air conditioners come online and draw huge amounts of power, and baseload sources of electricity can’t meet spikes in demand, so other sources of electricity switch on to meet that added demand. In Ontario, that’s natural gas, which is far more expensive than hydro or nuclear. And that’s why the cost goes up. At night, when offices shut down and air conditioners turn off, cheaper baseload power sources are adequate to meet demand, and electricity prices fall.

In Quebec, which doesn’t have TOU pricing, if demand drops so low that hydroelectric dams are generating more electricity than is needed, they allow water to bypass the dams, every drop of which is essentially wasted electricity. For an electricity provider, it’s great if people are using their dishwashers at night or, as Jim Burpee, an energy consultant and the recently retired president of the Canadian Electricity Association, puts it, charging their electric cars. “Really what [electricity providers] are doing is trying to change our behaviour,” Burpee says. “Because you have fluctuations throughout the day, and it’s a huge variation, you want a balanced system.”[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column width=”1/1″][vc_column_text disable_pattern=”true” align=”left” margin_bottom=”0″]What does the future hold for prices?

From changing our energy mix to be more environmentally friendly, to including small-scale electricity generation, to updating the grid to become more reliable, cleaner and more efficient, Canada’s electricity system is in the process of becoming modernized. This may include more energy sourced from renewables, local energy-driven economic development, smart grids and infrastructure for electric vehicles. And the prices of all commodities tend to go up when they begin being produced more sustainably — but that’s because the true environmental costs of producing commodities has rarely been factored into their pricing. This is changing. Electricity users of the future will have to be (and will have the opportunity to be — for example, through renewable sources of smallscale generation they’ll be able to sell electricity back into the grid) more engaged in the electricity system if they want to manage their electricity costs.

[/vc_column_text][vc_column_text disable_pattern=”true” align=”left” margin_bottom=”0″]Burpee cautions, however, that this means the cost of electricity is only going to go up. “The idea is we’re investing for the future. You can’t run all the assets to the ground and not worry about the future generation. So we’re still at a point of modernization, and prices are going to go up faster than the rate of inflation. But if we don’t do it, then we sacrifice long-term reliability.”

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Every residential electricity bill across Canada contains at least one thing: how much you need to pay for the electricity you used. What is bundled with that cost varies, so here’s a list of what you might find on your bill and what each item means.

Electricity: How much power you used, usually in kilowatt-hours multiplied by the price.

Delivery: Customer service, the cost of building and maintaining networks, a transmission charge and a loss-adjustment that covers the electricity that is lost while travelling to your home.

Regulatory charges: There’s a cost to running a market, and this is your share.

Generation: Whether it’s building a power plant or the ongoing fuel costs, producing electricity isn’t cheap, and the price is passed on to you.

Rate rider: This charge covers unforeseen circumstances such as low-water or higher-than-expected market prices.

Local access fee: In Alberta, this fee is collected by electricity companies and paid to your municipality in return for access to municipal lands.

Innovation: You won’t see this cost, but it should be on your bill. As Jim Burpee notes below, if we don’t start updating our electricity grid now, we’ll be stuck with a crumbling grid later.[/vc_column_text][/mk_custom_box][/vc_column][/vc_row][vc_row][vc_column width=”1/1″][vc_column_text disable_pattern=”true” align=”left” margin_bottom=”0″]

– Thomas Hall

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Read more stories from the Winter 2016 issue of Energy Exchange magazine[/mk_button][/vc_column][/vc_row]