Saturday, May 23, 2020
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COVID-19 will lead to a huge spike in Global Adjustment in 2021

COVID-19 will lead to a huge spike in Global Adjustment in 2021

In our latest blog post How will COVID-19 change the Top 5 Peaks for Ontario's Global Adjustment ICI program? we explored the impact that COVID-19 will have on Ontario Electricity Demand, and how this may change the Top 5 Coincident Peaks for the Industrial Conservation Initiative program.

There is one other major impact COVID-19 will have on ICI, and this one has to do the with the actual Global Adjustment cost.  Because the electricity system has many fixed costs, as Ontarians use less electricity, those fixed costs are spread out over fewer megawatts. The Hourly Ontario Energy Price (HOEP) and GA are interconnected and when one goes down the other goes up. Due to lower electricity consumption, the April HOEP is down more than 50% from the Jan-Mar average. This reduction in HOEP is offset by an increase in the GA for April.

In order to reduce the negative impact of this sudden GA spike on Commercial and Industrial consumers, on May 1, 2020, the Ontario Government passed an emergency order to defer a portion of the Global Adjustment (GA) cost into 2021. This is one of the ways the government is helping industry weather the COVID-19 storm, what they have announced is simple:

• The GA for April, May, June 2020 will be capped to $115/MWh for Class B Customers.

• This works out to a roughly 15% reduction in GA.

• Whatever the actual percentage reduction ends up being, it will be implemented for Class A customers as well.

• These costs are being deferred and will be recovered from Industrial and Commercial customers in 2021.

What does this mean for Class A customers? This means an increase in GA costs starting January 2021. The GA cost so far this Adjustment Period (from July 2019 to March 2020) has already increased 23% over the same time period last year - and this is without the effect of COVID-19.

Early projections show the deferred cost could be about $200,000,000/month. This works out to an increase of 5% on GA above what the regular increases are.

For Class A customers, managing the Peak Demand Factor and curtailing during the ICI Top 5 peaks takes on even more importance this upcoming Base Period during Summer 2020.  

To learn more about managing your peaks effectively, see our pTrack™ page here.

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