Smart Meters in Ontario – Financial Ruin, or an Opportunity for Savings?

Smart Meters in Ontario – Financial Ruin, or an Opportunity for Savings?

We’d like to introduce a new Columnist for us.    Cornwall resident Richard Komorowski is a freelance writer with a passion for energy and environmental issues dating back to the 60s, when he studied biology in university.

RK

Here is Richard’s first column for us.  Lucky most of us live in Cornwall where we are served by Cornwall Electric.

Smart Meters in Ontario – Financial Ruin, or an Opportunity for Savings?

Like it or not, many people reading this column will have one of the new digital “smart meters” installed by the end of 2010. Once Hydro One has finished this installation program throughout the province, then the way they charge us for electricity will change. For most people, this will come as an unpleasant shock, but there are ways we can insulate ourselves from these higher costs, and actually reduce our total electricity cost, without necessarily lowering our consumption.

To understand how the new billing system will work, we need to understand how electricity is billed. We buy potatoes by the pound (or kilogram), gasoline by the litre, and electricity by the kilowatt hour. One kilowatt (one thousand Watts) is a measure of power, (in more understandable terms, one horsepower is 746 W), so we are charged for the amount of power we use over a certain time.

As an example, burning a 100W light bulb for one hour would use one tenth of a kilowatt hour. Running a 1500 watt electric fan heater for one hour would consume 1.5 kilowatt hours of electricity. How is this going to affect our electric bill? Hydro One charges a fixed monthly “cover charge”, the cost of the actual electricity used, and the cost of delivering it to you.

The electricity cost varies according to the season. During the summer, between May 1 and October 31, Hydro One sells the first 600 kWh of electricity used for 10.41¢ per kWh. If we use more than 600 kWh during the month, then the price per kWh rises to 11.32¢/kWh.

This is actually very confusing, because the actual cost for the electricity itself is only 5.7¢ for the first 600 kWh, rising to 6.6¢/kWh for anything over 600 kWh per month. The extra 4.71¢/kWh is for transmission line costs, regulatory costs, debt retirement charge, etc. In addition, a residential customer pays a flat rate of $16.35 per month, over and above the actual electricity used.

Let’s take an example. Suppose we use a total of 1250 kWh during a month. The actual cost for electricity would be 600 x 10.41¢ for the first 600 kWh ($62.46), plus 650 x 11.32¢ for the balance of 650 kWh ($73.58), for a total of $136.04, plus the 16.35 fixed charge – in all, and disregarding taxes, $152.39. (Incidentally, the monthly cost for this amount of electricity from Cornwall Electric would be about $137)!

Winter is a little different, but the idea is the same. Hydro One recognizes the need for heating, and so it allows the first thousand (rather than 600) kWh at the lower price. For 1250 kWh, the cost would be $104.10 + $28.30 + $16.35, i.e. $148.75.

However, once Smart Meters come into operation, all this is going to change. The rate at which electricity is sold will depend on the time of day – during peak periods it will cost a lot more than during quiet, or low-demand, periods. Here are the proposed rates: (click on the chart to enlarge)

SmartMeterRates

As we can see, there is an enormous difference in price throughout the day, and if we continue to consume electricity in our normal pattern, the bill will come as a very nasty shock, particularly for those who rely on electric heat, as most electricity is consumed in the mid-peak and on-peak periods. However, now that we understand how the time of day affects how much electricity will cost, we can work out how we can reduce our electric bills without losing too much of the comfort and convenience of our current electric lifestyle.

And remember, too, that the table is the actual electricity cost, and does not include the 4.71¢/kWh delivery charge. If you add this, on-peak electricity will actually cost 13.81¢/kWh.

In future articles, we shall discuss ideas and technology to implement these changes and reduce the bill.

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