Ontario TOU pricing pilot demonstrates demand reduction

Toronto, ON, Canada — (METERING.COM) — July 27, 2007 – An Ontario Energy Board pilot project has shown that Time-of-Use (TOU) prices motivated consumers to shift some of their electricity use away from peak hours, with the shift largest for the consumers on special pricing plans designed to shift usage on critical high demand days for power, such as very hot days in summer.

The project, which was conducted in conjunction with Hydro Ottawa, ran from August 2006 to February 2007 with 375 randomly selected participants to test the reactions and impacts on consumer behavior of different time-sensitive price structures.

Three separate pricing structures were tested – the  Board’s standard TOU pricing (where commodity prices change in relation to periods of off-peak, mid-peak and on-peak); the standard TOU pricing with critical peak pricing (CPP); and the standard TOU pricing with a critical peak rebate (CPR). Participants received fridge magnets that spelled out the TOU prices that applied to them.

Over the course of the entire pilot period, on average, participants shifted consumption and paid 3 percent or $1.44 less on monthly bills with the TOU pilot prices than they would have paid on the utility’s regular electricity prices.

About 75 percent of participants paid less on the TOU pricing, compared to their charges on the usual regulated utility commodity price, due to shifting away from critical peak or on-peak periods.

The average reduction in consumption in the summer due to shifting usage during critical peak hours in the three pilot groups was 5.7 percent, 25.4 percent, and 17.5 percent for the TOU, TOU+CPP and TOU+CPR groups respectively.

Results also indicated that participants reduced overall electricity consumption by an average 6 percent (6 percent TOU, 4.7 percent TOU+CPP, 7.4 percent TOU+CPR).

Combining these two sets of data there was a total average monthly saving of over $4 and about 90 percent of the participants paid less on the TOU price plans offered in the pilot.

A subsequent survey completed by 298 participants found that 78 percent would recommend TOU pricing to their friends. The three top reasons given for recommending TOU pricing were more awareness of how to reduce the bill, greater control over costs, and benefiting the environment.

The survey also found that less than 20 percent would want to return to regular prices. Some 71 percent felt the current difference between the off-peak to on-peak TOU prices is about right while 16 percent felt the difference should be increased to provide the necessary incentive to shift consumption from peak periods.

When asked what tools helped them the most during the pilot, participants identified the fridge magnet as the most important tool, followed by the monthly electricity usage statement with a daily usage bar chart breakdown by TOU price.

Other participants in the project were IBM Canada – Global Business Services as the prime contractor, eMeter Strategic Consulting that led the program design and execution, and Professor Frank Wolak of Stanford University who evaluated the results.

Additional TOU pricing pilots are being conducted by Newmarket Hydro, Oakville Hydro in submetered condominiums, Veridian Connections among medium-sized business consumers, and Hydro One among residential, farm and small business consumers and also involving real time in-home display monitors.