Businesses Evaluating Electricity Price Growth in Ontario

It’s a fact.  Ontario businesses pay higher energy bills than any other province in Canada, placing a burden on budgets and operations.  Power generation makes up the largest component of the monthly electricity bill, and as a result, the more traditional sources of power like hydroelectric and nuclear get paid lower rates than renewable sources.Businesses Evaluating Electricity Price

The rising cost of energy is due in part to the 2009 Green Energy Act enacted by the government to expand renewable energy production, encourage energy conservation and create green jobs.  With the passing of the Act came spiked Global Adjustment charges, which have been a topic of conversation ever since.

The Global Adjustment (GA) is a surcharge for the difference between the market wholesale price and the fixed-price. Money generated from Global Adjustment is also used to pay for  conservation programs and nuclear power projects.  The GA, along with the phase-out of coal generated energy and a growing electric supply, has resulted in large additional costs for consumers.

Upon the passing of the Green Energy Act, the government began to build new infrastructure and commissioned wind and solar plants to replace the old coal plants.  It also decided to outsource the work to the private sector, which would then be responsible for costs.  As such, the first wave of private power plants was fuelled by natural gas.  The system, which is overseen today by the IESO (Independent Electricity System Operator), is a government agency that ensures adequate power is produced and shipped to meet demand.

The cost was then passed onto the consumer in the form of higher energy bills, making affordable electricity a growing challenge for Ontarians.   Residential, commercial, and industrial consumers are all assessed GA, which varies each month depending on what’s happening in the real-time energy markets.

To reduce costs incurred by GA, the government introduced the Industrial Conservation Initiative (ICI). In exchange for reducing electricity usage during the top 5 peak hours each year, large volume consumers, specifically businesses, are able to reduce their Global Adjustment costs by approximately $500,000 per MW.

Larger businesses who are eligible to participate in the ICI program are categorized as ‘Class A’  and their monthly GA charges are based on their electricity demand during the top five hours of system peak from the previous base period.

More recently, Ontario’s provincial government has taken steps to clarify electricity bills, with more to be done in the future to protect businesses and ratepayers from rising energy costs. With the new Ontario Electricity Rebate, eligible businesses are provided with a 31.8% rebate on their electricity bill. Also, the government now requires electricity bills to show the true cost of power as a single line item, which was concealed before.

Helping Ontarians see the true cost of electricity is part of the government’s plan to restore their trust in the energy sector and build a transparent and accountable electricity system.

Businesses owners who operate on a substantial amount of electricity hope that these actions as well as future savings actions will give them a reprieve from paying astronomical prices for their electricity.