While the cost of electricity generation is the lowest its been in decades, Ontarians are paying record highs for power. The increase in retail prices is due to the Global Adjustment (GA) – a charge administered on electricity purchases to cover the government’s contracted generation rates and conservation programs (read more about these rates and programs here). The Global Adjustment charge is included in the electricity bills for all consumers who pay the Hourly Ontario Energy Price (HOEP) or have signed a retail contract – essentially, anyone who pays an electricity bill.
These charges are forecasted to continue to increase as more renewable energy is developed, nuclear plants undergo upgrades, and conservation programs are expanded. Even if the cost of generation continues to decline, the Global Adjustment charges will increase to cover the additional costs borne by the government based on contracted rates. Ross McKitrick, Professor of Economics at University of Guelph, explains in his article in the Financial Post how conservation efforts, such as energy efficiency measures, are not guaranteed to reduce GA charges either; “If people conserve power and demand drops, the GA per kWh goes up, so if everyone tries to save money by cutting usage, the price will just increase, defeating the effort.”
The increase in companies’ operating costs due to Global Adjustment has resulted in increased development of on-site power generation in Ontario. On-site generation, also referred to as behind-the-meter generation, allows companies to generate their own power (and heat, in terms of cogeneration) and avoid GA charges. Behind-the-meter generation is also incentivized by the government as a way to reduce demand from the grid. With the ability to reduce GA charges and obtain financial grants, on-site generation is a compelling value proposition for many companies in Ontario.