Ontario Smart Meter Program
Smart meters are used to cut electricity bills by tracking usage in homes and business settings. The goal is to reduce electricity usage during periods of peak demand, offering incentives through a time-based pricing scheme. At the same time, many share the opinion that the program is not cost-effective, causes higher bills, and wastes money without cutting electricity demand.
Time Meter Technology
Smart meters help local distribution companies to determine the amount of electricity used during mid-peak, off-peak, and peak periods. High prices are set during certain hours of the day and during certain days in which demand for electricity is high. Customers are given the opportunity to cut or reduce usage during peak periods to reduce their electricity bills. The main benefit of using smart meters instead of standard ones is that they can measure usage during the day.
Smart Meter Initiative, Problems and Challenges
The Ontario Smart Meter Program was developed to solve problems related to tight supply. Limited supply is mainly due to lack of investment, transmission problems, and problems with existing plants. While the goal is to reduce consumption and demand, the initiative failed to live up to its promise. According to Bonnie Lysyk, Ontario’s Auditor General, some 17 percent of the meters installed in the province had not transmitted any readings in 2014. Reports by energy agencies also show that consumers use almost the same amount of electricity during peak hours and periods as they did before the smart meters were installed. Not only this, but between 2010 and 2016, the cost of electricity increased by 82 percent during peak periods, resulting in high bills for consumers. For many, it is time to reevaluate the time-based pricing scheme and the benefits it offers to consumers.
The main goal of the program was to give households opportunities and incentives to shift usage from peak to off-peak periods. However, a report by the Brattle Group consulting firm reveals that the time-based pricing scheme failed to offer sufficient incentives to reduce usage. In fact, demand and usage fell by just 0.7 percent according to the 2015 – 2016 Energy Conservation Progress Report drawn up by the Environmental Commissioner of Ontario. The expected cut in demand in Ontario was six times higher. Another report by BEworks, a management consulting firm with a focus on behavioral economics, shows that the new pricing model failed to shift consumption to off-peak periods. The 2014 report by the auditor general confirms the findings.
In fact, just 35 percent of households reduced their consumption, and the main reason is that off-peak and on-peak rates are not significantly different to offer consumers real incentives to change their usage patterns. In 2013, the average reduction in consumption was just 3.3 percent according to a report by Navigant Consulting.
A blogger and independent advocate Scott Luft explains that the new pricing scheme affected low users and benefited heavy users. The same rates apply to households that use less than 600 kWh and to those that use more, meaning that the cost of electricity actually dropped for heavy users. In fact, certain groups of people cannot take advantage of time-based pricing, including seniors and parents with small children who stay home most of the time.
Finally, the benefits of differential pricing and the Ontario Smart Meter Program were significantly overestimated due to a lack of adequate planning. A cost-benefit analysis was not made by the Ontario Energy Board or the Ministry of Energy before the start of the program.
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