How is Ontario Managing the Electricity Cost Problem As We Head into 2021?

For Ontario consumers, the 2020 fall budget outlook is a lot to handle. Here’s what you should know.

With COVID-19 showing no signs of slowing down, the Ontario government has constructed a comprehensive plan to address Ontario’s restricting energy costs for current, and potential new business.

If the new plan has you feeling anxious, don’t fret. Our power experts are here to break down what you need to know as an Ontario energy consumer, and how you can keep your own electricity costs down in the long-term.

First, let’s take a look at the landscape of Ontario’s current energy reality.

Currently, we’re seeing many high-cost contracts with non hydro renewable energy producers. Launched in 2009, the Green Energy Act was derived around electricity produced by Wind, Solar and Bioenergy - locking customers into high-priced contracts, thus resulting in higher prices and lost jobs.

Since 2008, prior to the Green Energy Act’s launch, the total cost of Ontario’s electrical system increased from $14.5 billion to $21.9 billion - an increase much higher than growth rate in overall consumer prices. Furthermore, the price of electricity has increased 37 percent for industrial users from 2008-2019, while commercial user rates increased over 118 percent in the same time frame.

Needless to say, the cost of electricity has made Ontario a less attractive place to do business, and has resulted in missed opportunities for jobs in industries such as mining, steel and manufacturing. And on top of that, the COVID-19 pandemic has magnified the need to address the electricity cost problem. This needs to be addressed if Ontario is going to compete for new investments and businesses as governments globally plan for recovery from the global recession.


So what’s the plan for 2021 and beyond?

As much as 85% of high-cost wind, solar and bioenergy contracts bonded previously, and the government will be funded by the province - not ratepayers - which will play a role in saving medium to large industrial/commercial businesses approximately 14 to 16 percent on their average hydro bills, respectively.

With that said, this will affect each industry differently:

For the automotive and chemical industries:

The new initiative is projected to help all of Ontario’s industrial sectors, with the auto manufacturing and chemical industries likely seeing the largest reduction in electricity prices - as they do not generally reduce their electricity demand during peak hours in the year.

For the pulp & paper and mining industries:

Pulp & paper and mining is estimated to see the lowest percentage decrease in their electricity bills, as they are generally able to avoid electricity consumption during peak consumption times. Since electricity accounts for a higher percentage of operational costs, these industries will still see significant overall cost savings with this new initiative. In addition to this, qualifying large Northern Ontario industrial companies that are in the NIER (Northern Industrial Electricity Rate) program will receive an additional 2 cents per kilowatt-hour rebate on eligible consumption.

For potential employers to Ontario:

With rates decreasing to an estimated 8.05 cents for industrial employers, and 14.31 cents for commercial employers, this will reduce prices to below average in the United States. After analyzing studies in the U.S regarding the economic impact of changing electricity prices, it is estimated that with the new electricity rates coming into effect in Ontario, this will open up twenty-nine thousand jobs in the manufacturing sector alone.

What does this mean for Ontario’s Global Adjustment Fees?

By making Ontario’s electricity prices more competitive, the opportunity to grow electricity demand exists by attracting new businesses and investments that have been avoiding Ontario in the past due to higher costs.

However the fact remains that Global Adjustment is not going away - and while it may decrease slightly over time as electricity demand increases, GA will still account for an estimated 50 percent of monthly bills for class A and class B consumers.


Power costs in Ontario getting you down? Our T&T Power Group is here to help.

As we have transitioned T&T Power Group into a one-stop shop for all power generation, distribution and application needs, we are able to provide significant operational cost saving opportunities by tailoring turnkey solutions.

Our partnership with Siemens Energy has opened significant discounts for prime power and GA peak shaving applications until the end of 2020.

Contact our team of experts at T&T Power Group to learn about how you can start saving today.

 

 

Posted by Ben Tinklin | Nov 26, 2020 | Categories: Power Generation