Large businesses in Ontario know the stats well – electricity rates in the province have been trending higher for the past decade. A Fraser Institute report noted that in Toronto and Ottawa, electricity rates for large consumers grew 53% and 46%, respectively, from 2010 to 2016. That’s compared with an average increase of just 14% in other Canadian cities.
In addition, large industrial consumers paid nearly three times as much for electricity as similar businesses based in Montreal and Calgary. Ontario now has the highest electricity costs across all Canadian provinces and among the highest costs in North America, the report added.
Energy management firms like Active Business Services conduct their own studies on recent trends of the Hourly Ontario Electricity Price (HOEP). For the first week of September 2018, HOEP has averaged 4.82 cents/kWh, while August finished off at 3.06 cents/kWh and July at 3.04 cents/kWh. Active Business Services notes that this marks the first time that July and August have both averaged over 3 cents/kWh in the past five years. By August 2018, there had already been three months with a weighted average HOEP above 3 cents/kWh. If September continues on its current path, 2018 will have 4 months with a HOEP average above 3 cents/kWh for the first time since 2014.
Risk mitigation is an integral part of operations for large businesses and industrial consumers. That’s where companies like Active Business Services come in. The energy management firm provides custom energy assessments to business clients, evaluating the company’s energy needs and providing detailed strategies to reduce consumption and costs.
With more than 100 years of combined experience in the energy industry, Active Business Services also offer guidance on whether a business’ energy procurement plans are working properly, and if they can be changed for the better, leading to improved energy savings.
There are a number of ways for businesses to save on their energy costs, making energy management firms even more valuable in the often-complex world of energy pricing.
Load following energy plans take past energy consumption into account to estimate exactly how much electricity to buy ahead of time at a negotiated price. It’s essentially a form of block pricing, which may also make sense for some companies, though it does carry risk.
Energy management firms offering load following plans examine a company’s historic energy usage and then propose exactly how much electricity the business should purchase each month to match future consumption. The load following option also helps protect businesses from price instability.
GA Charges and the ICI
The primary driver of increased electricity costs in Ontario has been the Global Adjustment (GA) charge. Energy providers impose GA charges to cover the cost of providing adequate generating capacity and conservation programs. Lower energy prices in the wholesale market lead to a higher GA to cover generation costs. Similarly, the GA rate is affected when new conservation projects are introduced.
But there’s a way to rein in GA charges. Since 2010, Ontario businesses that qualified for the Industrial Conservation Initiative (ICI) were assessed an annual GA rate based on their contribution to peak demand on the grid. This means that businesses that can predict when their peak demand will occur, and that can temporarily reduce demand during that period, will save on GA charges. Ontario expanded eligibility for the ICI in 2017, allowing all buildings with a peak demand of 1 MW or greater (was 5 MW or greater) to participate. Select industries with peak demand of 500kW or greater might also be eligible for the ICI.
In addition, as of May 1, 2018 all customers who were previously on an RPP rate (with their local utility) and are now supplied by Active Business Services are eligible to receive a $44.38/MWh (4.438 cents/kWh) reduction in their GA charges, under section 7 of the Ontario Fair Hydro Plan Act (OFHP Act).
Even though infrastructure improvements in Ontario may improve energy reliability and even create energy savings in Canada in the long-term, industrial consumers should still be looking closely at their energy consumption patterns and developing ways to make their company more energy efficient.