Summer Update on Ontario Energy Market

August 3, 2020 Scott McNeil-SmithEnergy News 242 Views

With summer weather fully upon us, this is one of the more critical times for Ontario manufacturers to be fully engaged in their energy strategies – in particular how to manage those aspects which directly affect your utility bills.  Spikes in weather are triggering significant electricity cost impacts, however we are hearing from many members and non-members alike again this summer, they are being urged to sign contracts by energy salespeople declaring ‘the sky is falling’, without considering the bigger picture.

We want to ensure you are aware of the resources to support… and no single approach is best for all manufacturers!

Attend a special EMC Energy Webinar: COVID-19 Impacts/Q2/Q3 Energy Market Update on August 25 for a more indepth discussion.

HOEP and Global Adjustment Update

HOEP (Hourly Ontario Electricity Price) has jumped up a little in July with a MTD average price at 2.07 cents/kWh (compared to the YTD average of 1.2 cents/kWh). The commodity price will likely settle down once the hot weather moves on.

As reported in our last update, on June 26 the Ontario government announced that companies who participate in the Industrial Conservation Initiative (ICI) ‘will not be required to reduce their electricity usage during peak hours this year, as the proportion of Global Adjustment charges for these companies will be frozen.’

In other words, your current Peak Demand Factor will be used this year (July 2020 to June 2021) and it will be the same for the following allocation year (July 2021 to June 2022). IESO has a similar statement on their website:

Class A Global Adjustment

Note: The Ontario Government has introduced an Industrial Conservation Initiative (ICI) peak hiatus for ICI participants to allow industrial and commercial businesses to focus on recovering from the impacts of COVID-19. Class A customers do not need to anticipate and reduce their electricity demand during peak hours in 2020-2021 as they work to return to full levels of operation. Instead, Class A customers will have their peak demand factor from the 2019-2020 period used to determine their global adjustment charges in 2021-2022. For additional information, refer to the Energy Ministry’s news release.

The peak hiatus applies to Class A customers participating in ICI for the 2020-2021 period (i.e., July 1, 2020 – June 30, 2021). Accordingly, any Class B customer wishing to enter ICI  in the 2021-2022 period would have their peak demand factor assessed based on their demand in peak hours during 2020-2021 (i.e., May 1, 2020 – April 30, 2021).

In summary, based on these two recent announcements, as long as you are currently a Class A GA consumer (and have a Peak Demand Factor from the May 2019 to April 2020 base period) then you don’t have to curtail for the current base year which runs from May 1, 2020 to April 30, 2021. You will keep your current PDF for the following year.

Any consumer that is currently Class B and in the process of establishing their demand threshold to qualify for Class A consideration next year will still want to reduce their demand in order to get their Peak Demand Factor as low as possible for the July 2021 – June 2022 allocation period.

Also, if a consumer ELECTED to be Class B for the current allocation year, instead of Class A (July 2020 – June 2021) it appears that these consumers will be treated similarly to new entrants to the Class A group, so they should also continue to curtail demand this year if they are contemplating a Class A choice next year.

Steve Williams at ECNG says it is interesting to note that demand this year has been very high relative to previous summers, as the graph below illustrates (2020 Peak demands YTD below):

If you have any questions or would like to discuss how EMC’s Energy Team is bringing peace of mind to manufacturers across Canada, please contact Scott McNeil-Smith.