Ontario’s Global Adjustment: Is it Here to Stay?
In 2006, the government introduced Global Adjustment (GA) to help Ontario cover the difference between electricity market rates and the rates provincial leadership agreed to pay for new generators as a way to to provide adequate generating capacity and conservation programs throughout Ontario.
Global Adjustment is used to fill the gap between the price as determined in the wholesale market (HOEP) and the price necessary to cover contracted generation, and is a fee billed to all hydro customers in Ontario.
In 2009, Global Adjustment charges spiked with the passing of the Green Energy Act and have been on the continued rise. In fact, a report in 2015 by auditor-general Bonnie Lysyk found Ontario consumers had paid a surplus of $37 billion in energy charges from 2006 and 2014 and will likely spend an additional $133 billion by 2032.
Ontario’s push to promote wind and solar energy can be costly and some Ontarians argue whether GA charges are necessary at all. With the topic up for debate, it’s a fact that GA charges can account for the majority of a businesses’ electricity bill.
To further address these issues, The Industrial Conservation Initiative (ICI) was enacted in Ontario in 2010 as a way to allow large consumers of electricity to save on the Global Adjustment cost by reducing consumption during provincial peak events. Under ICI, consumers are charged Global Adjustment on the basis of their share of the total system demand during the highest five peak hours of the year.
While the ICI was established to alleviate the costs generated by GA, some say it has merely shifted them from large consumers to small consumers.
In challenge of Ontario’s Global Adjustment rate, many consumers are saying GA is unconstitutional because it is a tax that was not passed by legislature. Whether or not this argument will gain more validity will remain to be seen.
Like much of Ontario’s complicated energy policy, the future of Global Adjustment rates is not yet clear. While the ICI program is still intact, there is still no direction from the government on next steps. In the meantime, there are talks for and against a flat rate for GA to be paid by all consumers. It will be interesting to see what unfolds next.