Proposed Implementation of an Ultra-Low Overnight Electricity Price Plan for Regulated Price Plan Consumers

Background

Since the introduction of Customer Choice in Ontario for electricity ratepayers on November 1, 2020, most residential, small business, and farm electricity consumers have had the option to switch to the electricity pricing plan that best suits their lifestyle or business, giving them more control to find savings. There are currently two pricing plan options: 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 RPP rates can be found at this link.

On November 16, 2021, the Minister of Energy requested the OEB to examine, report back, and advise on the design of an optional price plan (referred to by the OEB as the Ultra-Low Overnight Time-of-Use Price Plan) to further incent demand-shifting away from peak periods to lower-demand periods. The minister’s letter is available here.

On February 9, 2022, the Ministry of Energy solicited feedback on a policy proposal to enable a new ultra-low overnight price plan through the Environmental Registry of Ontario (ERO) and Regulatory Registry of Ontario (RRO) (available here). Stakeholder feedback was generally supportive of the proposal and indicated that it could help achieve the underlying objectives of providing additional customer choice, preparing the electricity system for electrification, and supporting decarbonization. An ultra-low overnight rate, that would be introduced under the proposed new price plan, was described as an effective means of shifting demand to overnight periods and responding to possible grid constraints from the growing electric vehicle (EV) population.

On March 31, 2022, the OEB reported back on a proposed design that includes an ultra-low overnight rate (report available here). Among other facets, the proposed design features four pricing periods – on-peak (4:00–9:00 PM on weekdays), mid-peak (7:00 AM–4:00 PM and 9:00–11:00 PM on weekdays), weekend off-peak (7:00 AM–11:00 PM on weekends and holidays), and an ultra-low overnight period (11:00 PM–7:00 AM every day), with the overnight rate proposed to be approximately ten times lower than the on-peak rate. On April 12, 2022, the Minister of Energy sent a letter to the OEB expressing interest in working with the OEB and other partners in implementing the proposed new price plan (available here).

The Ministry of Energy has also consulted local distribution companies (LDCs) and the Independent Electricity System Operator (IESO) on the costs, benefits, and implementation requirements of the proposed new price plan.

Summary of Regulatory Proposal

The proposed launch date for the ultra-low overnight price plan is May 1, 2023. To implement the new price plan, the Ministry of Energy is proposing regulatory amendments to O. Reg. 95/05 under the Ontario Energy Board Act, 1998 that would, if approved:

• set out key parameters for the OEB in determining rates for consumers under the new price plan.
• require distributors to offer RPP consumers a choice among TOU, Tiered, and the new ultra-low overnight price plans no later than November 1, 2023. Those distributors who can, may begin charging the new price plan to their customers starting on May 1, 2023.
• require the OEB to set rates for the ultra-low overnight price plan that apply between May 1 and October 31, 2023. New RPP rates normally take effect annually on November 1.

The proposed ultra-low overnight price plan would be distinct from the existing price plans, with a different set of price periods and different rates for at least some of those periods. Consistent with the OEB’s report to the minister, the design of the proposed new price plan would include four price periods:

1. Ultra-low overnight price period that applies from 11:00 PM–7:00 AM on weekdays, weekends, and holidays throughout the year;
2. On-peak price period;
3. Mid-peak price period; and
4. Weekend off-peak price period.

Implementation Approach

In addition to amendments to O. Reg. 95/05, implementation of a new RPP price plan would likely require amendments to the OEB’s Standard Supply Service Code and RPP Manual, as well as updates to the IESO’s meter data management and repository (MDM/R). It is expected that the OEB and the IESO would each consult on these changes separately.

The OEB is expected to make available an election form for customers of LDCs to provide the new price plan on May 1, 2023. The election form would be available by April 2023.

Analysis of Regulatory Impact

This proposed regulatory change would not introduce a new mandatory administrative burden on small businesses and farms since the proposed initiative would be voluntary and optional for consumers.

By offering RPP consumers an expanded choice for their electricity pricing plans, these consumers would be able to choose a plan that best fits their individual needs, which could result in some cost savings. However, actual savings each month would depend on consumption patterns and amounts, and the OEB has a regulatory obligation to ensure that electricity prices are set in a manner that ensures electricity system cost recovery.

This proposed change does not impact large commercial and industrial businesses, who do not pay for electricity through the RPP.