Will time-of-use pricing reduce power pain?

The figures show time-of-use pricing can save you money, just don't expect electricity retailers to spell it out for you.

We all dread the quarterly electricity bill and my first one under the July 2013 increase has just arrived.

Being a hopeless geek, I quickly uploaded the data to my spreadsheet, called my utility to understand the incomprehensible gibberish cunningly described as ‘a bill’ and managed to understand what they were talking about. 

This bill is particularly confusing because it’s crossed over the financial year rate rise; I pity the un-geeks in this world because ‘confusion is profit’ never rang more true.

Duly following the links on the bill, I also located the comparative rates under different scenario’s – flat rates and time-of-use, which I volunteered for a year or two ago. I recall the reaction of many friends and colleagues when TOU was introduced, which ranged from “what the ^&**(&*$#?” to “$0.45ckWh? Are they kidding? Who would agree to that?”, to even more colourful phrases. Undeterred, I have stuck with it as quasi academic exercise; and the results are now bearing fruit.

For comparison, in my area my TOU rates are now:

-- Off Peak $0.119 cents/kilowatt hour.

-- Shoulder $0.0199ckWh.

-- Peak $0.478ckWh.

-- Daily access charge is $0.79 cents day.

If I elected to change to a flat rate:

-- First 1000kWh $0.249ckWh.

-- Next 1000kWh $0.268ckWh.

-- Daily access charge is $0.71 cents per day.

So on face value, I wondered what on earth am I doing?

There are a few interesting things that I learned though.

Firstly, given that I had to pay for my meter to be installed and it’s fully digital (compared to my old rotary meter), I’m quite perplexed that I am charged almost 12 per cent more per day for the ‘privilege’ of being on TOU. In concert with the quite scary $0.478ckWh peak rate, I’m not surprised that most people take a quick look and decide not to sign up.

For all the bluster about trying to incentivise demand savings clearly, my utility could give apparently two hoots. There is NO price signal in this equation that would attract anyone in their right mind after a cursory glance.

The other disincentive I hear from punters and electricity folks is that TOU price signals have limited traction; people do what they have to do when they have to do it. I can testify to that because with three kids and a busy life, my better half manages to work miracles and is aware, but barely focused on when electricity is used.  

On top of that, in our rental property we have little option but to use small electric heaters in strategic spots to warm our cockles in winter. We do our best and always see a surge in winter but still manage to keep our gross consumption down to under 12kWh/day, which is around half the comparable average.

I’m a bit more focused on it of course, and took another couple of steps this year by putting centralised, remote control standby switches in. We abandoned them after a month because they kept eating batteries, not working, or resetting the TV/stereo system every time they were switched on and off – the cost of the irritating phone calls to make it work was far beyond the savings and marital grief.

I remain optimistic that there is a better system out there, but haven’t found one yet. I also added a programmable timer to my electric bike so that I’m recharging in off-peak periods only, which saves money but doesn’t utilise my solar for recharging. Net CO2 compared to my combustion-engined bike is still miles better and I do use solar for recharging on weekends, so I can live with that for now.

So TOU IS a signal, even to the non-geeky types in our house and it IS having an impact. Our behaviour has changed.

What about the financials you ask?

Well even with our clumsy lifestyles and a higher daily access charge, we manage to save a little over 2 per cent on our total costs on TOU rates. So it works financially too. I’ve graphed it so you can see the comparisons below.

Graph for Will time-of-use pricing reduce power pain?

Now I can hear the skeptics out there saying ‘yeah sure, but you’re not normal Nige’ (not for the first time I might add). So, to keep you happy, I doubled my consumption to the normal average consumption of 24kWh and remodeled the results below. The result? TOU still wins, but in this case the relative savings increase to almost 7.6 per cent per quarter, assuming our time demand profile is the same.

Graph for Will time-of-use pricing reduce power pain?

‘But that’s just where you live; what about us,’ I hear you say? Okay, so here are the results across all NSW districts for my retailer and the picture certainly starts to change a bit.

-- Firstly, we can see that the signals are very different for our semi-rural and regional cousins.  If you were consuming energy like we do, TOU does NOT save you money; in Essential’s and in Endeavour’s area, you would be around 9 per cent worse off.

-- Interestingly, if you are an average consumer (using 24kWh/day) in Essential’s area  however, you WOULD save  money on TOU, around 3 per cent. If you are in Endeavour’s area however, you are still 4 per cent worse off on TOU (which kind of explains why they only have a reported five TOU customers, doesn’t it?).

Graph for Will time-of-use pricing reduce power pain?

Graph for Will time-of-use pricing reduce power pain?

What’s the point here?

1. Yet again, I see evidence of disingenuous pricing signals and a clear attempt to NOT get customers to take up TOU. Why? Because it works against the underlying premise of building more assets through increased demand or worse, if like me, consumers do adjust behaviour, it makes less revenue for retailers.

2. As a punter, with just a little bit of attention to detail, TOU can save you money; but not in every case.

My kingdom for a utility who can innovate! 

This article was originally published by Solar Business Services. Republished with permission.

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles