Time of Use (TOU) tariffs and how to compare your prices with other suppliers - discussion

Great thoughts. Interesting discussion. Is the best name “Variable Tariff” or “Time-of-Use Tariff”? The latter feels more appropriate but I’ve seen both in different places. Variable implies the standard tariff that you revert to at end of contract.

I struggle to understand how such Tariffs can be compared between suppliers, perhaps because I have never seen one in use.  I understand the principle, but as to the practical day-to-day application, I’m in the dark.  The answer in this thread by @Transparent is very helpful, but the slideshow linked is full of acronyms that take a while to get your head around.  Most of Ofgem’s reports and forums seem to stop in 2013!  Citizens Advice also has a useful assessment of the benefits and pitfalls of a Time-of-Use tariff rollout which as a newbie I found useful.

I’ve got economy seven, and other than putting washers on at night, there isn’t much I can do to adjust my consumption to match.  If a Variable aka Time-of-Use tariff gives next day prices for each half hour at 4pm the previous day, that is not something for which I can easily amend usage manually. Half an hour is too short to clothes or dish wash. It seems that to use a Variable Tariff effectively, I would need to invest in smart devices - and with an annual bill of £1200 of which only £360 is electric, that would be a LONG payback period. Roll on air source heat pumps, better home battery storage and better insulated fridges and freezers so that they can be powered down in peak cost times.

I cannot imagine the vast majority of consumers being able to comprehend such tariffs, nor switching supplier with them. If the rates are set each DAY by each supplier for the next day, how can you compare one to another, except on historical data? Will suppliers have to define a % by which they will be above or below a centrally set half-hourly rate?

I recall a few years ago there was outcry on the forum from people who had moved to OVO in autumn for a cheaper tariff, and were upset because their Direct Debits were increased shortly after joining. They could not understand that MUCH colder weather than the previous year meant more heating, so more units used, and even at a cheaper rate per unit, higher monthly cost and Direct Debit.

That is before you get me on to the fact that most retail and many commercial customers don’t understand the difference between a Direct Debit and a Standing Order.

The rest is perhaps off the immediate topic, but it all links to how we use the available energy effectively.

The people I can see losing out substantially are the ones most at risk. Older and/or less well off without access to or ability to use smart devices.  People with children who HAVE to cook when the kids come home, wash clothes daily and use the tumble drier because they do not have that many changes of clothes available. People living in old uninsulated houses who lose heat the moment they turn the heating off. The ones who gain will be the ones who can afford to live in a new insulated house, or retrofit an older one, replace gas boilers with heat pumps, install batteries or buy electric cars. The issue seems far far bigger than mere Time-of-Use charging.

As examples: My older friends have smart meters only because it means they do not need to give monthly readings. They don’t look at their IHD or change their use, and get upset if I suggest they should. They won’t consider loft insulation because they put an inch in when that was the rule.  Younger relatives with children at home live in rented accommodation, which is old and unimproved. None of them would get any benefit or be able to adjust how they use.

Should the comparisons that we all get in our bills where it shows how much more or less than average be used to trigger a review of potential energy savings? Is that something a supplier could or should offer,  grant-supported by a scheme less cheatable than the warm home one was?

It looks as if the Australian government already has a comparison mechanism - including solar panels.

Further research: The UK government already has a project to develop a comparison tool, so they might already be doing what you are thinking of doing.

I couldn’t find it on their site by searching, but this recent article on the Carbon Trust web site looked promising

Carbon Trust experts part of new UK government-funded consortium to develop smart tariff comparison tool for consumers

07 July 2020 NEWS

The Smarter Tariff - Smarter Comparison project aims to develop a comparison tool prototype that gives consumers an easy way to compare smart tariffs such as time-of-use, export and electric vehicle tariffs. 

It is a contract for research awarded to Vital Energi, and seems to be a very closed group, not involving consumers other than through davies+mckerr (consumer research).

Wow, for davies+mckerr the first phase of the project consisted of 24 qualitative online interviews with energy consumers.  A whole 24!

Vital Energi’s post linked above says that they will be launching a new web site for the project.  Perhaps that is how you can get involved. 

Here’s the topic we’ve made, @EverythingNeedsAUserName 

FYI to anyone reading this, we created this discussion topic from another ongoing discussion here about the ‘Could you pay less’ feature of your statements / summaries. 

There’s also another topic related to TOU tariffs here, from @ArundaleP that is worth checking out for anyone interested in this. 

I am aware of the government project and the ongoing research and interviews (I took part). 
It will be interesting to see the path this goes down. Reading between the lines, the impression I got was there are talks of using your real historic smart meter data to allow comparison between suppliers. 
 

I haven’t heard anything for a few months now but will let you know if there is anything interesting (as long as it’s not confidential of course).

The biggest problem I see is not everyone is on a smart meter or has real time of use consumption figures. Those that have it hopefully will allow us to compare tariffs for our particular consumption habits and maybe suggest a few tweaks to save money , CO2 etc.

Keep us in the loop as much as you can @ArundaleP - your knowledge on the subject is much appreciated here!

I’d like to suggest a mechanism which could solve this problem. As usual I’m going to resort to diagrams. 

Let’s imagine that we are offered a Time Of Use tariff which permits two variables that may be set for any half-hour period of the day:

• Energy mix
• Price per kWh

Looking first at Energy Mix, I’m going to simplify the choices down to three broad categories:

• fossil fuels; coal, oil & gas (excluding bio-methane)
• renewables; hydro-electric, wind, solar, wave, anaerobic digestion etc
• nuclear; fission, but possibly fusion in time to come

We can set these out at corners of a triangle, thus

This enables a customer to define a preference by choosing a point within the triangle that best fits their preferences.

For existing OVO customers, that point must be somewhere along the line between Fossil and Renewable because Nuclear Energy isn’t available at all. By contrast, a customer on EDF’s Blue+ Tariff will be most of the way towards the lower-right corner because they achieve “low carbon” energy by mainly using nuclear.

Now let’s bring Price per kWh into the equation. I’m going to lay the triangle down and project price vertically on the 3rd axis:

A customer can define how much they are willing to pay in order to use their Energy Mix. This produces the Yellow Plane hovering above our original triangle. It effectively allows a bias such that the customer is moved further away from their Mix-preferences as the cost of doing so is more than they’re prepared to spend.

In order to compare Tariffs between different Energy Suppliers, we need the matrix which defines that Yellow Plane, combined with the total annual consumption figure which we already use.

Taking this one more step forward, the unit-price of our electricity is going to change according to the time of day. That’s the Time Of Use tariff which is the subject of this Topic.

Over the months we will continue to make choices about our electricity use. That effectively shifts the Yellow Plane as we respond to cheaper energy when the sun shines, or times when we might over-ride our normal preferences for a special event… perhaps the occasional need to charge our EV during a period of peak demand.

All of this is noted by the Billing System, which is therefore able to calculate the Standard Deviation for movements of our Yellow Plane throughout the year.

So our electricity Tariff Comparison Information now has three parameters:

• Total Annual Consumption (as at present)
• the Matrix defining the Mean position of our Yellow Plane
• the Standard Deviation from that Mean over a given period of time

… all of which should provide us with enough data to compare between tariffs from rival Suppliers.

Discuss…..

Wow @Transparent that is some post. 

My thoughts are: 

1. For most customers, I suggest we simplify the mix options to become boolean for each type. This doesn't punish OVO (in fact it would help) but actually simplifies it for the consumer and makes it fair. This provides seven price points at any time, the 3 points, the 3 mid points between lines and the centre of your triangle. I think starting simple as this is probably a fair thing to do bth for suppliers and end users.

2. The acceptance then of "if you use an energy I didn't want to use it needs to be £x cheaper" is then relatively simple to implement as well (and I like this thinking)

3. Agree if we have the half hourly prices from billing, and the pricing table, along with fuel mix for each tarrif (which can obviously be displayed as the %split allowing people to pay a bit more to move along an axis in the triangle in a finer grain than the 7 points) we can then bring a fair comparison.  If we have a years worth of data (but ideally 3) then comparisons will smooth out exception events and demonstrate normal as special occasions happen every year.

I eagerly await your response!

I don’t understand the strategy behind your first step @Jequinlan - why Boolean?

I’m trying to start from where we are at present. We already have the electricity Energy Mix data for each Bulk Supply Point (BSP) on the Distribution Grid.

So, for example,  here’s my energy mix for the last hour:

and here’s the energy-mix data for the entire day:

That enables a pretty accurate Time Of Use tariff to be built and then combined with my preferences. There’s nothing boolean about this data.

@Transparent I think you may have missed what I was trying to say, perhaps it was my poor communication. 

Rather than specifying a suggested mix % as target, I was suggesting the default starting point should be if you were willing to accept or not fuel from each source or not (boolean)

I.e. my starting point may say "i am happy with renewables and nuclear but don't want to use fossil fuels. This would easily put me on the bottom middle on the triangle as a simple start point. 

If I said i was happy with fossil fuels and renewables but no nuclear,  then i am on the left side of the triangle. 3 simple boolean flags can generate a much simpler starting point sor users (7 points as no to all isn't an option) it was just an easier start than saying where on the triangle i want a tarrif 60% renewable , 17.33% nuclear and the rest fossil.. 

It would look something like 

Renewable energy : yes/no

Nuclear  energy: yes/no

Fossil fuel energy: yes/no

Amount i would have to save to use other fuels: £xx