What is Time-of-Use Pricing and Why Is it Important?

[vc_row][vc_column][vc_column_text]By Home Improvement Leads in collaboration with Energy Exchange

A large portion of the population is away from home during typical work and school hours—and that’s why less energy is consumed in most homes throughout much of the day. During the mornings and evenings, however, the demand for energy grows. This is when the majority of us are at home, using our electronic devices, turning on the lights, and adjusting the thermostat for more comfortable temperatures. These times of day when a region’s energy load is highest are referred to as “peak” energy hours.

Time-of-Use Rate Plans

Traditional utility prices involve a set rate per kilowatt-hour, which can fluctuate during the summer and winter. A sliding rate scale, however, is structured according to peak and off-peak times of day. This is called a “time-of-use” (TOU) rate plan. Under such a plan, your bill will be determined by how much energy you use and when you use it.

The prices and peak times vary based on the season and day of the week; for example, many utility companies consider weekends off-peak. The structure often looks different in the summer or winter months, with more tiers to accommodate the increase in HVAC system use as everyone tries to cool off or stay warm.

In Canada, most provinces offer TOU pricing plans only for industrial customers – although in Ontario, TOU rates are mandatory for residential customers across the province. In order to accurately calculate TOU rates, buildings must be equipped with smart meters, which record electricity usage by the hour and communicate this usage to local utilities. Almost every household and business in Ontario is now equipped with a smart meter. Over 60% of Ontario customers can now access their hour-by-hour electricity usage data thanks to the Green Button initiative, which gives them greater control over reducing usage during peak hours.

What is Time-of-Use Pricing and Why Is it Important? How Knowledge Can Save You Money

You may be wondering how a time-of-use pricing plan and an awareness of peak hours may benefit you. Well, knowledge is power; if you know the times of day that can save you money, you can concentrate your energy use within those periods and avoid peak hours. Energy is less expensive to produce when fewer homes are using it. Therefore, a TOU pricing plan means your rates align with the daily decrease in electricity generation and delivery costs.

You’re also helping the greater good this way. When many individuals shift to off-peak hours, it reduces strain on the power grid and leads to improved reliability during peak hours. Using less energy during high demand can also help reduce market prices.


How Time-of-Use Plans Help the Environment

Power plants can be enormous contributors to pollution, especially during peak hours. That’s because when electricity demand peaks, utility providers must use additional power plants to keep up. Throughout the day, baseload plants provide a steady, constant flow of power, which in Canada is mostly generated by nuclear plants and reservoir hydro plants. When baseload plants alone don’t provide enough power, we turn to peaker plants which can ramp up and down as demand changes. In many provinces though, peaker plants are run on combustible fuels like natural gas or coal, which emit greenhouse gases. If you shift your energy use to off-peak hours, you’re helping reduce the workload, as well as the need for more plants to be built so that utility companies can keep up with demand.

If you’re interested in slashing your utility bills, you can do more than adjust your energy use schedule. Make your home more efficient with these favorite tips:

      • Improve your insulation and weather-stripping. Seal up air leaks.
      • Replace old, inefficient appliances with Energy-star rated
      • Install energy efficient lightbulbs and low-flow water fixtures
      • Adjust the temperature when you leave—warmer in the summer and cooler in the winter.
      • Cover your windows with curtains or an awning on the outside.
      • Install low-emissivity windows or apply energy efficient window treatments.
      • Hang your clothes to dry in nice weather.
      • Switch to a cold water detergent and wash all of your clothes in cold water.
      • Get timers for HVAC and lighting.

 [/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_custom_heading text=”You might also be interested in…”][mk_blog style=”grid” grid_image_height=”300″ post_count=”3″ disable_meta=”false” excerpt_length=”0″ exclude_post_format=”” posts=”8423, 8777, 8576″][/vc_column][/vc_row][vc_row][vc_column][/vc_column][/vc_row]

7 thoughts on “What is Time-of-Use Pricing and Why Is it Important?”

  1. Time of use pricing might be a good idea if Hydro One’s rate structure was more appropriate to encourage consumer usage patterns to change. Unfortunately, it is not. I live in a rural area of eastern Ontario served by Hydro one and was on TOU billing. A few months ago Hydro One sent me a letter informing me that I could not stay on TOU because they could not get reliable readings from the smart meter. I was switched to two tier billing. I wondered if the change would have a negative effect on what I pay so I recalculated the past year’s bills (I save them all) using the two tier rates. To my surprise two tier billing would have cost me about 10% less per month on average, even though my usage pattern typically was about two thirds off peak and the remaining third about evenly split between mid and peak. I understand that the reason for TOU billing is to reduce demand at peak times, but the current rate structure does nothing to provide an incentive to consumers to do so. So until the rate structure changes, I’m happy to be off TOU billing.

  2. And those who do not fit into your established “norm” (non-day shift workers, seniors, stay at home Moms/Dads. To name but a few), pay a premium. This makes up a fairly significant portion of the population.

    For example, in order for me to fully utilize the TOU billing model, I would have to cook, clean, do laundry, cool/heat my house etc. during a two hour period every day.

    How is this fair?

    This is a ridiculous policy.

    Try thinking outside the box a bit here. Try offering a rebate of sorts to those who use less during peak periods. This would do more to encourage more thoughtful use of energy usage than the penalty approach.

    I believe there was a graduating scale years ago that was much fairer. Blend that with a TOU and you will have a more equitable solution than the ‘carrot vs stick’ approach.

    My advice would be to not have engineers exclusively make these decisions. Engage the public. Straight line math is not always the best path to the best solution.

    Thorne Hughes.

  3. Shame on you all; charging on-peak pricing at a time ( 5PM – 7 PM ) when most of us come home and must cook dinner for family and kids.
    Nothing to be proud off.

Comments are closed.