Global Adjustment and Changes to Class A Customers
In 2005, the Ontario government established a line item on electricity bills called Global Adjustment (GA). The intent of GA was to account for differences in the Hourly Ontario Energy Price (HOEP) and the contracted electricity rates that the Ontario government pays to third party contracts through Ontario Power Generation (OPG), Independent Electricity Supplier of Ontario (IESO) and Ontario Electricity Financial Corp (OEFC). The GA rate is calculated as:
GA = (OPG+IESO+OEFC) – HOEP
Initially, the monthly calculate GA resulted in some months with a positive GA and other months with a negative GA. In the past number of years, however, GA has consistently been positive, and has even dominated the HOEP. In 2008, HOEP averaged about $0.050/kWh and GA averaged about $0.007/kWh. In 2015, however, HOEP dropped to about $0.022/kWh, while GA went up to $0.078/kWh.
Although the exact breakout of the GA varies from month to month, attempts have been made to allocate the costs to various fuels and organizations. The chart below is a 2016 breakout showing the relative costs of the three components as well as the breakout by fuel type.
Class A Rate Payers
Class A rate payers, historically defined as customers with peak demands greater than 5 MW, pay for GA in a different manner than all other rate payers. For most rate payers, GA charge is based on their consumption (kWh). Under the Industrial Conservation Initiative (ICI), Class A rate payers, are charged differently for GA. They are charged based on their percentage of their contribution to the top five provincial peak hours over a 12 month base period. These hours are referred to as 5 Coincident Peak or 5CP. The top 10 peaks should be used to estimate the 5CP periods. The top 10 peaks between May 1/15 and Apr. 30/16 are:
Industrial Conservation Initiative – New Rules
Effective January 1, 2017, rate payers with peak demands as low as 1 MW can opt in to participate in ICI as a Class A rate payer. If properly managed, the rate payer can significantly reduce their GA charge. According to Aegent Energy Advisors Inc., in 2015 the average Class A rate for GA was $0.041/kWh, whereas Class B paid $0.079/kWh. Of course, if not properly managed, and if the facility has a relatively high demand in relationship to consumption (often called utilization factor), a rate payer could end up paying more under Class A than it would have under Class B.
If your demand is above 1MW, it is important to have a professional look at your hourly utility data to:
- See if you would benefit from opting into ICI without making any changes to consumption patterns.
- Uncover ways in which you could further reduce GA charges through active management of demand.
Active management would include following the forecasted peak demand and estimating if there are any potential 5CP periods approaching. It would then involve making decisions on how to reduce your facility’s demand through turning off lights, HVAC, processes, compressed air, etc., and/or operating on-site generation equipment.
Customers have until June 15, 2017 to opt in to ICI Class A for the next period beginning July 1, 2017. If you have any questions in regards to opting in to Class A, please contact me at firstname.lastname@example.org.