Why Time of Use Pricing?

Electricity is a commodity with a price that fluctuates based on a number of factors including source and the concept of "supply and demand".

In Ontario, The Ontario Energy Board (OEB) sets prices for electricity under the Regulated Price Plan (RPP). Up to 2011, Thunder Bay Hydro residential and small business customers paid for electricity based on a TIERED RPP. A first portion of electricity was charged at one rate. Consumption above that amount was charged at a higher rate. Prices were based on the electricity supply costs forecast for the year ahead, and any adjustments required due to differences between what was paid and what supplies actually cost over the previous period.

When electricity was first provided to consumers, rates were based on averaging out the more expensive (daytime) and cheaper (nighttime) prices of electricity, simply because our older meters couldn’t report when it was used.

Smart Meters measure hourly electricity use, so electricity prices can be different at different hours of the day. That better matches the way prices work in the electricity market, and is expected to encourage Ontario consumers to think more about how and when we use electricity.

Why is peak time more expensive?

Supplying electricity at peak times (those times when we're all using a lot of electricity) has a range of impacts:

It adds to electricity costs because higher demand often means higher market prices.
It's hard on the environment because more of the less attractive forms of generation must be run to meet demand.
It adds to the amount that Ontario needs to invest in the system because meeting the peaks means building even more new generating facilities, and more transmission and distribution infrastructure—and that also adds to electricity costs.

What is the actual current cost of electricity?

Between now and 2025, Ontario will need to replace about 80 per cent of its electricity system. There are several ways to do that:

building new generating facilities,
refurbishing current facilities (where that makes economic sense), and
investing in conservation and energy management tools so that we, hopefully, require less new electricity generating capacity.

As you, the consumer, move consumption away from the more expensive (peak) times of the day, this can help Ontario reduce its peak demand, which can help limit the building and operation of peak generating facilities.