Energy: What decision should you make about time-of-use billing?

Wednesday, May 5, 2010

You can stay on the RPP, drop out and pay the spot price or opt for a fixed-price contract. The choice is yours

by RON MACDONALD

Electricity is difficult to store. As a result, when usage increases, more must be generated. And, since we live in a world where most people work (and play) during the day, demand is high in the day and low at night and weekends.

Low-cost power is available during periods of low demand, but it is expensive to start and stop generation each day, and even for an hour, to match loads.

Time-of-use billing refers to a new method of billing, using an electric meter that all homes and many farms will be living with in the near future. Essentially, every hour, the meter records how much energy you used. This will be matched against the rate pricing in force at the time of that hour of use.

Time-of-use rates will vary based on the time of day, season and whether it is a weekend or weekday. Figure 1 below shows time periods for winter and summer. So how should you react to these billing changes? Don't worry. The sky isn't falling. There are three choices for your billing. The first is to remain on the Regulated Price Plan. All farms are eligible for the RPP regardless of size; the choice is up to the individual farm. Second, you can drop off the RPP and be charged based on the spot market (www.ieso.com). Third, you can sign a fixed price energy contract.

1. RPP. RPP is the average of spot prices and the price is reset every six months. Your savings/costs versus time-of-use are based on load shape. This is the default option and you will be on it unless you choose another option. If you do not have an interval or smart meter, you will be paying 5.8 cents for the first 750 kWh/month and 6.8 cents for the remainder.

If you have an interval or smart meter, the bill will be based on the time-of-use rate plan. If your usage pattern is flatter than the average residential pattern, your bill will go down with time-of-use rates. If it is peakier (more use in weekday peak periods), then your bill will go up.

2. Drop out of RPP. To drop out of the RPP, just notify your utility. If you do not have an interval or smart meter, you will pay the Standard Supply Service price, which is based on average use. If you have an interval meter, you will pay the actual hourly spot market price. The spot price has been very low for the past year, at about 3.5 cents, but it can be volatile. Important note! You will also pay the Provincial Benefit (BP), which has averaged three cents. If you sign a fixed price contract, you will pay that fixed price plus the PB.

3. Fixed-price contracts. You should do this if you think electricity prices will go up as the economy improves. Choose a term from one to five years. If you sign a fixed price contract, you will pay the fixed price plus the PB.

Caution! You should search around. There are large differences in prices being offered. If you need help, go to www.energyshop.com or any other independent third-party contract provider. They objectively compare contract prices. It's my experience that Energy Shop can get a lower contract price than the average farmer can negotiate. Energy Shop has successfully helped some of our clients to get a better deal,even after they have signed one. Consider signing only a percentage of total load (i.e. 30-50 per cent) because of PB.

What is the Provincial Benefit? PB is based on a government initiative to:
• Ensure Ontario has enough generation by guaranteeing prices to generators;
• Encourage renewable energy (solar, wind, biomass).
It can be a rebate or a surcharge. You can't escape it. It is built into the RPP rates also. It is based on the difference between the spot market price, and the average of the prices that have been guaranteed to generators.
• 3.5 cent spot price and six cent guarantee = 2.5 cent PB charge
• 6.5 cent spot price and six cent guarantee = .5 cent PB rebate
For more information on contracts from retailers and prices, go to www.energyshop.com and for information on Ontario deregulation and other energy matters, check www.oeb.gov.on.ca or www.iemo.com BF

Ron MacDonald, P.Eng., is an agricultural engineer with Agviro Inc. in Guelph.