“Time-of-use vs Tiered?” is a question Ontarians have been asking themselves since 2020. That was when all consumers in Ontario became free to choose a pricing plan that best suits their lifestyle and individual electricity use. However, before switching plans, it’s essential to know the difference between Time-of-use (TOU) and Tiered rates to find out which one is the most money-saving option, considering their pros and cons as well as your consumption.
If you choose the Time-of-Use (TOU) setup, your bill will be based on when and how the electricity is used (time, frequency, etc.). If you decide on the Tiered prices, you can consume a certain amount of electricity each month at a lower price, however, once that limit is exceeded, a higher price is applied.
Once you make a decision, you can request to switch between TOU and Tiered pricing at any time by contacting the distribution company (LDC) in your region to apply to change the electricity rate plan after completing and submitting an election form. Here’s an example from EPCOR on what the form looks like; you can find more details on their website. The switch will be effective in the next billing cycle in most cases.
Tiered or Time-of-use: Which plan is better?
Taking into consideration that with Tiered rates, electricity prices remain constant during the day, and if you use most of your electricity on weekdays, this could probably be the most affordable option — as long as your household uses less than 1,000 kWh/month in winter and 600/month kWh in summer.
Those who have the option to use more of their electricity during off-peak hours may prefer the TOU option. Other ones may favour Tiered prices because they want the flexibility to use electricity at any time of the day.
The average Ontario household uses about 800 kWh of electricity per month. Although that is useful information, the best way to know if one plan or another fits you best is to consider your energy consumption and habits.
The Ontario Energy Board (OEB) has a calculator that enables users to enter their consumption and bill details to compare what their bill would cost with each type of plan. The more energy bill details you enter, the more accurate the estimate gets.
According to the OEB, there are three TOU price periods:
- Off-peak, when electricity demand is lowest.
- Mid-peak, when electricity demand is moderate. These periods are during the daytime, but not the busiest times of the day.
- On-peak, when electricity demand is generally higher. These are the busier times of day – generally when people are cooking, starting up their computers, and running heaters or air conditioners.
Check our guide on how time-of-use rates and peak hours change from summer to winter.
Switching between Time-of-Use prices and Tiered prices
The possibility of Regulated Price Plan (RPP) customers switching between these two plans began on November 1, 2020, a day after the pandemic-related fixed prices for TOU customers ended.
With the fixed price program ending on October 31, 2020, the OEB introduced this as an option for households and small businesses looking for more predictability in times of uncertainty.
- Consumers can switch back and forth as many times as they like between TOU and Tiered pricing.
- All RPP-eligible customers are eligible to switch plans.
- According to Hydro One, consumers should evaluate their price plan options, energy usage and patterns, seasonal changes, and lifestyle before deciding to switch.
When Tiered pricing would be the best option
Tiered prices give you the flexibility to use electricity at any time of day at the same price, although that price will change if you exceed the threshold during the month.
Moreover, and still considering the electricity usage regardless of the day, the Tiered pricing may be the best option if you spend a lot of time at home, especially on weekdays, working, cooking, washing clothes, and cleaning your house, or if the opposite happens: you stay outside for a long period.
When TOU pricing would be the best option
When you are able to manage your electricity use at home or business by shifting the usage to lower price periods if possible. As everyone uses electricity differently depending on their routine and the season. Staying inside more or even working more from home in the wintertime, for example, could impact your bills.
TOU pricing: hours
WINTER
- Off-peak hours: From 7 p.m. to 7 a.m.
- Mid-peak hours: From 11 a.m. to 5 p.m.
- On-peak hours: From 7 a.m. to 11 a.m.; from 5 p.m. to 7 p.m.
- Weekend and holidays: Always off-peak
SUMMER
- Off-peak hours: From 7 p.m. to 7 a.m.
- Mid-peak hours: From 7 a.m. to 11 a.m.; from 5 p.m. to 7 p.m.
- On-peak hours: From 11 a.m. to 5 p.m.
- Weekend and holidays: Always off-peak
Tiered pricing
According to the OEB, during winter (November 1 – April 30), the Tier threshold for residential customers is 1,000 kWh, so that during the heating season households can use more power at a lower price. In the summer (May 1 – October 31), the Tier threshold for residential customers is 600 kWh, while the Tier threshold for small business customers is 750 kWh all year round.
Tiered pricing rates are set by the Ontario Energy Board. (Image: EnergyRates.ca/ Source: OEB)
What about small businesses?
The reasoning behind choosing between Tiered or TOU pricing is the same for small businesses: How much electricity do you use each month, and when do you use it?
The Tier threshold for small business customers is 750 kWh all year round, and each type of business has its specific electricity usage and needs.
Reviewing your business’ routine, hours, and consumption is the starting point.
RPP, TOU and Tiered Stats
- The Ontario energy market has been deregulated since 1998. This means consumers can choose to get their electricity and natural gas at the market rate from competitive retailers. However, the ability to switch from different types of regulated plans (TOU and Tiered) was only made available in November 2020.
- Before 2006, all RPP customers in Ontario were under the Tiered Price Plan.
- According to the OEB, only a few consumers who had smart meters were under the TOU in 2006 under a pilot project.
- In 2009, local distribution companies (LDCs) started replacing old meters with smart ones on a wider scale. By 2012, all utilities in Ontario had TOU prices.
- As of 2016, 96% of RPP customers were under TOU and the remaining RPP-eligible customers were billed the tiered pricing or a separate retail contract.
- The Regulated Price Plan (RPP) was launched by the OEB in April 2005, due to a sharp increase in the cost of electricity in the deregulated market the year before.
