Emergency Order Gives Ontario Businesses Reprieve from Global Adjustment Rates

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In an effort to defer a portion of Global Adjustment (GA) rates, the government of Ontario passed an emergency order that will provide industrial and commercial electricity consumers  that do not participate in the Regulated Price Plan (RPP), with temporary immediate relief on their monthly electricity bills in April, May and June 2020.  

The initiative could be a welcomed relief for consumers who have seen a marked increase in Global Adjustment charges due to the low electricity demand caused by the COVID-19 pandemic.  According to a government of Ontario press release, without the emergency order, Class B customers could have seen bills increase by 15 percent or more. The emergency order will hold GA rates in line with pre-COVID-19 levels.

Minister of Energy Greg Rickford comments: “Ontario’s industrial and commercial electricity consumers are being impacted by COVID-19. They employ thousands of hardworking Ontarians, and we know this is a challenging time for them.”

The order will provide financial support to more than 50,000 companies as they navigate these uncertain times and do their part to stop the spread of COVID-19 and will be in place through the end of June.  If needed, regulatory amendments would be provided for the deferral of global adjustment charges beyond June, as well.

The GA rate for smaller industrial and commercial consumers (i.e., Class B) has been set at $115 per megawatt-hour, which is roughly in line with the March 2020 value. Large industrial and commercial consumers (i.e., Class A) will receive the same percentage reduction in GA charges as Class B consumers.

Meanwhile, The Ontario Energy Association wants the province to stop subsidizing the price of hydro and offer targeted help to the consumers who need it most.  In recently released policy papers, the OEA says “Ontario is also now spending more on electricity subsidies than on its entire transportation system.”

The OEA report also states that if the province continues with its current pace, it will spend $228 billion subsidizing hydro rates over the next 25 years.

OEA President Vince Brescia acknowledged that removing subsidies, thereby increasing costs for some customers, may not make everyone happy.

“It’s not a message a lot of people want to hear but most people aren’t aware that we’re borrowing money to subsidize electricity, and when they find out that we’re doing that they really don’t like it. They think it’s a bad idea,” he says

The report also asks the government to keep some subsidies in place for rural and low-income residents, while also continuing to remove the provincial portion of the sales tax from bills.

The Global Adjustment (GA) was added to consumer’s hydro bills as a way to help offset the costs of replacing coal generated energy and to fund conservation programs and nuclear power projects.  The GA is a surcharge which is calculated by taking the difference between market wholesale prices and the fixed price of energy.  Ontario residents and business owners continue to pay some of the highest hydro rates in the country due in part to increasing global adjustment rates.