Insights into Ontario’s Electricity Market & Blackstone’s Energy Solutions

Ontario is a unique market in that it isn’t fully regulated or deregulated but is known as a “hybrid” market. Ontario sets itself apart from many other provinces due to its relatively clean grid and the make-up of costs to large electricity consumers, of which a large portion is classified as Global Adjustment (GA). The intricate GA charges significantly impact electricity costs, making it essential for businesses to grasp and navigate these complexities to achieve financial stability and sustainability.

Navigating the Global Adjustment

Ontario’s energy market utilizes the GA mechanism to recover costs associated with long-term generation contracts and conservation programs over and above what has been collected through the actual electricity commodity. The Industrial Conservation Initiative (ICI) program is a demand-response program in Ontario designed to manage electricity consumption during peak hours. This program allows large industrial and commercial consumers to manage their electricity costs strategically, categorizing them as Class A customers if they choose to participate. Those that do not participate are classified as Class B customers.

Class A Customers:

  • Large energy users with an average monthly peak demand greater than 1 MW in most cases; however, qualifying demand is reduced to 500 kW for consumers that fall within certain sectors – primarily manufacturers and greenhouses.
  • Pay their share of the Global Adjustment based on their Peak Demand Factor (PDF) which is calculated based on their contribution to provincial demand during the top five peak hours over a 12-month base period.
  • For example, if a Class A customer represents 0.5% of Ontario demand over the top five peak hours, they will be billed 0.5% of the province’s total GA costs.

Class B Customers:

  • Generally smaller energy users with peak demand below 500 kW or larger consumers that choose not to opt-in to the ICI program.
  • Pay the Global Adjustment based on the amount of electricity they consume in a month (in $ per kWh).
  • Depending on average monthly peak demand, Class B customers can choose to switch to Class A on an annual basis.

Importance of Managing Peak Demand

Managing peak demand is crucial for large commercial and industrial consumers, especially considering the significant impact of Global Adjustment charges on electricity costs. GA charges vary considerably for Class A consumers based on their Peak Demand Factors, comprising approximately 30-35% of total electricity costs province wide. In contrast, Class B consumers face higher GA charges, accounting for about 50-55% of their total electricity costs. However, some Class B consumers could benefit from transitioning to Class A by reducing peak demand.

The ICI program incentivizes Class A customers to shift their electricity usage away from peak periods, offering financial incentives in the way of lower GA charges. Through strategic management of peak demand, both Class A and B consumers can capitalize on the cost-saving opportunities provided by the ICI program.

Blackstone Can Help You!

Our team of energy experts has been helping businesses in Ontario optimize their energy strategies and reduce costs for over two decades. We offer tailored solutions for both Class A and Class B customers to strategically offset electricity demand during peak hours. Partner with Blackstone to lower your Global Adjustment charges and redirect savings towards other sustainability initiatives across your value chain. Reach out to us to start optimizing your energy costs today.