Abstract
Using 2008 hourly electricity data from 1,020 households in Milton, Ontario (Canada), this article asks and answers two questions: ‘How do residential customers’ total costs change as the result of a mandatory move from a traditional, flat-rate pricing structure, to a time-of-use one?’; and ‘Are particular “kinds” of customers either “winners” or “losers” as a result of this move?’ In response to the first question, 45% of customers have lower bills under a time-of-use regime (as compared with what they would have paid, had the previous two-tier regime continued, with their ‘new’ consumption patterns), while 55% of customers have higher bills. For 98.2% of customers, the difference in total cost is less than 5% (either way), and the average relative change is a 0.233% increase. In response to the second question, customers that have a relatively high level of consumption in either peak periods or wintertime are, in the absence of other differences, more likely to have higher bills under a time-of-use regime. Those households that consume higher quantities of electricity are more likely to have lower bills under a time-of-use regime, as compared with the two-tier regime. The article concludes by highlighting the equity implications of this finding and by identifying areas for future research.
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Notes
The 20 highest demand-days in Ontario have all occurred on weekdays in June, July or August, with peak demand between 2 pm and 6 pm (IESO 2010c).
To this point, we have been calling this general pricing approach the ‘flat-rate’ approach, in order to be consistent with industry-wide terminology. As we now move our discussion to Ontario in particular, we use the term ‘two-tier’ to refer to the particular regime in use in the province.
For a broader review of studies from this time period, see Aigner (1985). For a review of discussions that date back to the nineteenth century on this issue, see Hausman and Neufeld (1984).
Again, space limitations preclude a systematic review of all relevant studies. See, also, Simmons (2010).
Future investigation of homes with electric heat would be worthwhile. Milton Hydro was able to identify three homes in our sample that had self-reported the presence of electric heat in their homes. There may have been more, but we were not able to determine that. Though the sub-sample is extremely small, it is interesting to note that these three homes all had large consumption values (ranging between 21,883 and 31,412 kWh for the year), with more than two thirds of that consumption in the winter. Each house was a ‘winner’, moving from the two-tier rate to the time-of-use rate, with absolute savings ranging from C$205.76 to C$236.84 (representing relative changes of 6% to 10%).
This represents an ‘average of the averages’. The total absolute change, across all 1,020 accounts, is a 0.008% increase. Moreover, it is important to recognise that not included within this are the costs of the infrastructure associated with the move towards dynamic prices, that is, the widespread deployment of interval meters and a supportive environment.
Future studies could therefore begin to address some of the limitations associated with our study. One not yet made explicit relates to the fact that our households had had different ‘length of experience’ with time-of-use rates—some for a matter of months, others for more than 2 years. Therefore, there may well have been varying degrees of knowledge about the new rate regime, as well as varying levels of ‘rebound’ back to old, pre-time-of-use, habits.
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Acknowledgments
We are appreciative for the support and assistance of Milton Hydro Distribution Inc., particularly Andrew Peers, in this research. The research assistance of Brent Bowker is gratefully acknowledged. We also thank Vince Sebastian of VJS Associates for his assistance with the statistical analyses. The supportive collaboration with Dr. Guy Newsham (National Research Council, Ottawa) in the broader research endeavour is also gratefully acknowledged. However, we are fully—and solely—responsible for the contents of this article.
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Rowlands, I.H., Furst, I.M. The cost impacts of a mandatory move to time-of-use pricing on residential customers: an Ontario (Canada) case-study. Energy Efficiency 4, 571–585 (2011). https://doi.org/10.1007/s12053-011-9113-y
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DOI: https://doi.org/10.1007/s12053-011-9113-y