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Class A Redefined – Global Adjustment changes could spell big savings for some

Electricity Bill - Cost Structure in Ontario (Commercial)

On May 1, 2014 the Government of Ontario changed how the Global Adjustment will be charged to select customers. According to the Government of Ontario eligible customers will save between 15% and 20% on their annual electricity bill.

Background

In 2011, the Government of Ontario implemented the Industrial Conservation Initiative (ICI) whereby the largest consumers, or class A consumers, are charged the global adjustment (GA) based on the percentage of their peak demand that contributes to overall system demand during the five peak hours of the year. This methodology is referred to as 5 Coincident Peak (or 5-CP) referring to a customers peak demand at the time when demand in the province is the highest.

Example: Calculating Global Adjustment Costs With the 5-CP Methodology

With the 5-CP methodology your consumption during the time of the system peaks is what drives your Global Adjustment costs. The table below shows the 5 CP’s for the previous year:

Coincident Peaks for the Base Period from May 1, 2012 to April 20, 2013

Date

Hour Ending

Ontario Demand (MW)

July 17, 2012

16

24,465

July 4, 2012

17

23,799

June 20, 2012

16

23,869

July 23, 2012

14

23,813

July 6, 2012

16

23,471

Average

23,883

(source:  http://ieso-public.sharepoint.com/Pages/Participate/Settlements/Global-Adjustment-for-Class-A.aspx)

Revised Eligibility Criteria

Until very recently, eligibility for Class A was restricted to the very largest consumers, those with an average monthly peak demand greater than 5 megawatts (MW). However, the number of Ontario businesses that can benefit from this initiative has just expanded considerably.

A few days ago, the government expanded the eligibility criteria of Class A (filing of the enacting regulation) by reducing the consumption threshold required to qualify from an average hourly peak demand of 5 MW to 3 MW. The consumers would be assessed on their contributions to the top five demand peaks of the current base period (May 1, 2014 to April 30, 2015). The adjustment period begins on July 1, 2015.

Additionally, in order to qualify as Class A, the consumer must:

(1) formally give notice of electing to be Class A to its licensed distribution by June 15, and

(2) operate a facility that fits into one of the following NAICS sectors:

NAICS Sector Name
493120 Refrigerated Warehousing and Storage
21 Mining, Quarrying, and Oil and Gas Extraction
31, 32, 33 Manufacturing
518 Data Processing, Hosting and Related Services
1114 Greenhouse, Nursery, and Floriculture Production

According to the government of Ontario, Class A consumers will save on average 15% to 20% on their energy cost.

 

Sector/NAICS Average Monthly Peak Demand Annual Estimated Savings Reduction to Total Bill
Manufacturing (31-33) 4.1 MW ~ $400,000 12%
Data Processing (518) 3.2 MW ~ $900,000 23%

Source: Ontario Ministry of Finance

Additionally, by reducing their GA charges, Class A consumers can better manage their total electricity cost by hedging their Hourly Ontario Electricity Price (HOEP) exposure. The augmented hedge effectiveness represents an opportunity to save even further on their electricity bill.

We can help you determine your eligibility and assess the impact these changes will have on your GA costs.  Get in touch with a member of our team today. 

This post was written by guest blogger, Gabriel Villegas, Market Regulatory Affairs Advisor at Bruce Power. Stay tuned for future guest bloggers.

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