Proposal to Enable a New Voluntary Enhanced Time-of-Use Rate Including Consideration of a New Ultra-Low Overnight Price

Current Policy

Since the introduction of Customer Choice in Ontario for electricity ratepayers on November 1, 2020, most residential, small business and farm (RPP consumers) have a choice in selecting the electricity pricing plan that can save them money by choosing a plan that best suits their lifestyle or business – time-of-use (TOU) or tiered. Customer Choice is part of the government’s long-term plan to give Ontarians more choice and control over their electricity bills.

The Ontario Energy Board (OEB) sets both TOU and tiered rates as part of the Regulated Price Plan (RPP). These rates are paid by over five million consumers that are billed under the RPP. More information on the RPP rates can be found at this link.

Policy Proposal Context

Over the coming years, electrification of emissions-intensive sectors such as transportation is expected to provide opportunities to reduce province-wide emissions. This trend will also put pressure on the electricity grid as electricity demand increases. Recognizing these dynamics, the Ontario government and its agencies have begun working to analyze what steps could be taken now to prepare the electricity system for these changes.

Ontario is currently a summer-peaking province, meaning the highest times of electricity demand tend to be during hot, humid days and/or during a heatwave. Existing TOU prices include a higher price during the on-peak period, which is intended to encourage consumers to shift usage to lower-demand periods when possible. In a 2014 value-for-money audit, the Auditor General of Ontario noted that a wider difference between on-peak and off-peak TOU rates could lead to larger reductions in the average ratepayer’s peak demand and also reduce system costs.

In 2015, the OEB developed a roadmap to review and redesign the RPP to respond to policy objectives, improve system efficiency, and give consumers greater choice and control. To achieve these objectives, the OEB commissioned residential pricing pilots with various local distribution companies (LDCs) to test new price structures.

• Among these pilots was an opt-in low-overnight-pricing pilot, where participants accepted a higher on-peak electricity price in exchange for an ultra-low overnight price.
• The OEB’s recently released Regulated Price Plan Pilot Meta-Analysis Final Report found that the overnight rate structure has the potential to reduce greenhouse gas emissions, while providing more customer choice and opportunities to save money.

As part of the province’s plan to position Ontario as a North American leader in developing and building EVs, the province recently established a Transportation Electrification Council (TEC) to inform a Transportation Electrification Policy that will drive EV uptake in Ontario. With advice of industry leaders and community stakeholders on the TEC, the government is working to remove barriers, develop best practices, and provide strategic support to enable EV

Proposed Policy Change

Informed by the results of the OEB’s RPP pricing pilots and feedback received through the TEC, the ministry is considering enabling the creation of a new optional TOU rate plan with a new ultra-low overnight price. The objectives of this rate would be as follows:

• Provide additional customer choice: Provide greater choice and value to customers who may embrace opportunities to shift their demand under a different price plan, such as EV users, shift workers or other residential consumers with lifestyles that lead to more electricity consumption at night, or small businesses and farms that operate at night,
• Prepare the electricity system for electrification: Shift loads to overnight periods to potentially increase efficiency in Ontario’s electricity grid. For example, encourage EV owners to schedule charging at night, when Ontario’s electricity grid is most likely to have excess capacity. This could boost the efficiency of Ontario’s electricity system and reduce the need for new infrastructure, which reduces costs on all Ontario ratepayers.
• Support decarbonization: Shift electricity loads to lower-demand overnight periods when Ontario has more electricity available and electricity is generated largely from non-emitting sources.

On November 16, 2021, the Minister of Energy wrote to the OEB  in accordance with s. 35 of the Ontario Energy Board Act, 1998 (the letter can be found at this link) to require the OEB to examine, report back and advise on the design(s) of an optional enhanced TOU rate to further incent demand-shifting away from peak periods to lower-demand periods. This new TOU rate – informed by the low-overnight-pricing pilot – could appeal to EV users, and to other customers who may benefit from the price plan due to shift work, lifestyle, or other factors. The OEB has been asked to report back by April 1, 2022.

The ministry will consider the OEB’s report-back and other factors such as implementation costs, along with stakeholder feedback received through this proposal, in determining whether and how to proceed with the enablement of additional rate options for RPP customers.

Public Input and Next Steps

While the OEB completes its analysis, the ministry is seeking input from the public on the proposed policy of introducing a new optional rate for RPP customers. The OEB will be consulting with stakeholders in February 2022 on specific proposed price design(s). This Registry consultation seeks more general input on the consideration of alternative price options. The consultation also seeks input on opportunities to address other electricity-sector barriers, as identified by the TEC, that could facilitate the further adoption of EVs.  

Specifically, the ministry is seeking input on the following questions: 

System and environmental perspective of optional rate

• To what extent could a new optional province-wide enhanced TOU pricing plan help shift RPP electricity demand to lower-demand, overnight periods for activities such as EV charging? 
• How might an increased electricity price during periods of high demand (e.g. weekday afternoons/evening) and a lower electricity price during periods of low demand (e.g. overnight) help to integrate new sources of electricity demand, such as EV charging, into the distribution system? What impact might it have?
• How might government, its agencies and partners make use of the best available information, for example consumption data and EV ownership figures, to understand and forecast charging demand and profiles to inform a new rate design that ensures full cost recovery?

Customer perspective of optional rate

• How might an increased electricity price during periods of high demand and a lower electricity price during periods of lower demand help to remove barriers to households or small businesses in adopting EVs or other clean technologies? What impact might it have?
• What factors would be important to encourage consumers to opt into the new optional enhanced TOU rate plan?

Additional electricity sector opportunities

On November 15, 2021, the Minister of Energy wrote to the OEB to provide a new mandate letter. In this letter the Minister noted the expected increased adoption of EVs in the coming years and requested the OEB to “take steps to facilitate their efficient integration into the provincial electricity system, including providing guidance to Local Distribution Companies (LDCs) on system investments to prepare for EV adoption.” With this in mind,

• LDC connection processes be improved for at-home and/or commercial charging infrastructure?
• How can government better facilitate information sharing between LDCs and future EV users so LDCs can make appropriate infrastructure investments and be prepared to meet needs?
• How could distribution costs for larger customers billed on a demand basis be changed to support activities such as EV charging? How could this be accomplished while mitigating any impact to other electricity customers?
• How could LDCs effectively invest in their infrastructure to support EV adoption in the province ahead of demand materialization? What role could non-wires alternatives play in such investments?
• How could residential net-metering arrangements (i.e., rooftop solar and battery storage) support residential EV charging, reduce electricity bills and reduce the need for distribution infrastructure?

Next steps on this proposal will be determined following the completion of this public consultation and receipt of the report back from the OEB. An additional proposal will be posted should it be determined that legislative and/or regulatory changes would be required to proceed with a change to RPP pricing or to address additional electricity-sector barriers.