Understanding how you’re billed for electricity is the first step towards reducing your electricity costs.

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As a starting point, you should know that electricity prices fluctuate depending on supply and demand. In Ontario, the price of electricity is determined through the wholesale electricity market, which is managed by the Independent Electricity System Operator. Known as the Hourly Ontario Energy Price (HOEP), this price changes on an hourly basis, depending on the availability of electricity supply and the demand for it.

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Typically, when demand for electricity is higher, more expensive forms of generation are required. This drives up the cost of power. Weather plays a significant role in electricity demand. On a typical hot summer’s day, as temperatures rise, air conditioning use also rises from morning to late afternoon and can drive electricity demand up by as much as 25 per cent.

As a result, commodity prices change throughout the day, the week and even the season, providing businesses an opportunity to adjust their energy use to take advantage of lower prices.

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Prices tend to be lower over- night and on weekends and holidays when power demand is typically lower. As a rule, supply is determined by how much generators can produce. Certain power sources are more expensive to run than others, and usually only run when demand is high relative to available supply.

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The Hourly Ontario Energy Price (HOEP)
is set based on the bids and offers that are settled in the electricity market. This price varies on an hourly basis depending on demand. The price also takes into account factors such as weather, time of day, day
of week and economic conditions.