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Proposed changes to Ontario’s electricity pricing system  should reward big customers more for shifting demand off-peak.

Peak demand (which is now highest on hot summer afternoons) is particularly expensive to meet, and places the greatest strain on the electrical distribution grid.    Ontario is therefore providing better incentives for major electrical consumers to shift their demand off peak.   The Global Adjustment (GA), also known as the “Provincial Benefit”, is an Ontario electricity market mechanism that enables contracted and regulated electricity generation costs and other system costs to be compensated through market revenues from Ontario electricity consumers.

Every month since its inception in 2005, a global adjustment rate is calculated as the sum of the total global adjustment costs divided by the total volume of electricity consumed (see monthly rates).

Initially, the global adjustment had little effect on consumers’ electricity bills. However, dropping market prices for electricity in recent years has resulted in consumers being charged  a noticeable global adjustment rate regardless of the time of day that they use electricity, even though the actual cost of electricity is higher at peak periods. This is a particular concern for large volume electricity consumers.

The Ministry of Energy and Infrastructure therefore proposed, on August 27, 2010, a regulation under the Electricity Act, 1998 to amend O. Reg. 429/04. New factors proposed in the draft Regulation include: classification of electricity consumers based on average monthly peak demand, the identification of five peak hours for the reporting period, and the establishment of a peak demand factor.

The proposed change to the current global adjustment mechanism is expected to encourage large volume electricity customers to consume during “off-peak” hours, help reduce emissions as well as improve the reliability of the power grid.

The current mechanism for global adjustment costs is to remain the same until the proposed change takes effect on January 1, 2011. Approximately 200 of Ontario’s largest electricity users are expected to benefit from this proposed price change.

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