Thursday, August 4, 2011

On-peak and off-peak residential pricing

In The Kitchener-Waterloo Record on Thursday, 4 August 2011, there was a letter to the editor entitled ‘It’s an Inconvenience’.  I pull out two issues raised by the writer.
First, the author writes:  ‘I am home during those peak hours (and yes, I know I’m lucky to be here) and I find it frustrating that I can’t do normal household chores without paying almost twice what it would cost during off-peak hours.’  I wondered whether it would cost almost twice as much.
The author’s address is given as Breslau, which is in the Township of Woolwich and thus served by Waterloo North Hydro.  Consider a load like an oven, to cook dinner for an hour.  Estimates of how much energy this might use range from 2kWh to 5 kWh.  For this example, I use 3 kWh.
I then took the residential rates from Waterloo North Hydro’s website, and calculated the following figures for how much – under time-of-use rates – this task, at the margin, would cost.

Electricity (‘commodity charge’)
32.1 cents (10.7 cents per kWh)
17.7 cents (5.9 cents per kWh)
Delivery (2.569 cents per kWh)
7.7 cents
7.7 cents
Regulatory (0.65 cents per kWh)
2.0 cents
2.0 cents
Debt Retirement (0.7 cents per kWh)
2.1 cents
2.1 cents
HST (13%)
5.7 cents
3.8 cents
Clean Energy Benefit (-10%)
5.0 cents
3.3 cents
44.6 cents
30.0 cents

The difference between the two is just under 50% -- in absolute terms, just under 15 cents.  More generally, the reader is invited to look at the OEB’s website, to examine how different consumption profiles would affect their bill.
Second, the author writes – in the final paragraph – that: ‘They say this plan was introduced to help reduce the strain on our electricity system. Well, it seems to me that the strain is caused by businesses during those peak hours not those of us at home. If those of us that are home during the day are using that much power, just imagine what a strain it will be on the system when we join everyone else from 7 p.m. to bedtime or on the weekends to do laundry and use our dishwashers.’  Thus, the issue of what would happen, were time-of-use to be effective in shifting loads, is raised.  Given that the Ontario Energy Board adjusts the rates every six months – see this site for historical data showing how the gap between off- and mid-, and mid- and on-peak prices have changed – we would probably see a greater convergence of rates across the three bands and a shift, should it be necessary, in the time-bands (their start and end times) themselves.

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