In a news release Friday, June 26th, the Ontario government announced plans to stabilize electricity rates for participants in the Province’s Industrial Conservation Initiative (ICI). Effective immediately, companies that opted-in to Class A earlier this month will see their contribution to the Global Adjustment (GA) frozen until the Spring of 2022.
The goal here is to allow Ontario’s industrial base to ramp up production to pre-covid levels without worrying about their electricity usage during peak times in hopes that it may quicken the economic recovery. The change comes not long after the provincial government announced that a portion of the Global Adjustment would be deferred for one year.
Policy actions like this underscore the need for flexible GA Busting solutions
For anyone considering installing peak shaving equipment, policy change has always been a front and centre concern. While this set of temporary changes to the ICI are expected to either benefit or have no effect on current or planned ‘GA Busting’ projects it does highlight the importance of flexibility to offset policy risk.
For example, a typical peak shaving battery system will displace a facility’s load on the grid for two hours, but is often not capable of other functions. Some generator systems used for peak shaving can also produce electricity and heat continuously, year round, at rates that are increasingly cost-competitive with the local utility.
Should future changes to the ICI significantly reduce the savings available through peak shaving, don’t be surprised when savvy Class A customer’s start running their generators 24/7.
How will the government freeze Global Adjustment?
Class A customers pay their contribution to the GA based on their Peak Demand Factor (PDF), which is calculated based on electricity usage during the top 5 demand peaks on the Ontario grid. Normally PDFs are calculated annually, but with the new measures in place Class A customers will pay their GA fees based on their current PDF for one additional year. New PDFs will be measured for eligible customers from May 2021 - April 2022, and applied to hydro bills starting July 2022.
Great news for customers with low Peak Demand Factors
Class A customers who successfully implemented a peak-shaving strategy last year and scored a low PDF will get to take a break this summer. For example, any customers who ran on generator power or batteries during all five of the 2019-20 Coincident Peaks and achieved a PDF of zero will continue to see $0.00 in Global Adjustment fees until at least July 2022. Furthermore, they will save operating costs and reduce running hours on their peak-shaving equipment this year, as well as the burden of anticipating peaks.
Customers that under-performed last year will have to wait for additional savings
For customers who only managed to shed partial load during the 2019-20 peaks, or missed one or more of the peaks entirely, the opportunity to see further reduction in their Global Adjustment fees has been delayed until 2022. Considering that each megawatt-hour of electricity used during a single top 5 peaks costs at least $100,000 this is a real blow to the bottom line of customers in this situation who were counting on curtailment efforts this season to improve their PDF.
New participants for the 2021-2022 program year will not be affected
The one-year freeze on PDFs will not affect Customer’s planning to opt-in to Class A for the first time in the Spring of 2021. For this group, PDFs will be calculated as normal per their electricity consumption during peak hours in 2020-21. The many customers who invested in dedicated peak shaving equipment like generator and battery systems will be able to use them to reduce their PDF, and will see a return as expected starting in 2021.