Large energy consumers are worried about Ontario’s electricity market place. They expressed their concerns at two consultations hosted in June by Greg Rickford, Ontario’s Minister of Energy, Northern Development and Mines and by Todd Smith, Minister of Economic Development, Job Creation & Trade. The consultations were part of a review of the electricity market launched by the Ontario government to make provincial businesses more competitive.
360 Energy attended the consultations with key stakeholders from the agricultural and industrial sectors. The Industrial Conservation Initiative (ICI) and related Global Adjustment charges dominated the discussions at both events.
Large industrial consumers know how ICI works. They have learned how to successfully reduce Global Adjustment charges under the program. Concerns were raised that changes to ICI could add costs and create confusion if not handled appropriately.
In its original format, the ICI program achieved reductions in electricity peak demand by engaging very large industrial customers. More companies with sufficient electricity loads have since qualified for Class A status. The demand peaks have decreased. However, the disparity between Class A and Class B consumers has grown.
Some large electricity users, such as those in the food processing sector, cannot qualify for Class A status. Regulations will not allow them to shut down to avoid power demand peaks. As a result, their costs have risen and they operate at a competitive disadvantage.
Some Class A businesses are considering on-site natural gas generation to moderate their grid demand. Co-gen can have significant capital costs as well as benefits. Co-gen can also produce more Greenhouse Gas (GHG) emissions than electricity imported from Ontario’s clean grid. The dilemma for companies contemplating this solution is a need to compete and a commitment to reduce climate impacts.
Other concerns raised at the consultations included:
- Utility billing design. Utility bills are complex and difficult to understand. The presentation of rates, power use and power cost information is confusing. Companies that operate in multiple distribution jurisdictions are particularly dissatisfied by information appearing in diverse, non-standardized formats.
- Farmers and rural Ontarians feel they are paying more than their fair share for distribution charges. A rural distribution network serves a much smaller population, and generally serves smaller loads, than equivalent areas in urban centres. Distribution charges are correspondingly higher for rural users.
- Southwestern Ontario businesses are concerned about constrained capacity on their area’s distribution grid. Several of them suggested building on-site/distributed generation.Electricity rate structures vary widely between economic sectors. Agri-businesses have a different set of competitors than manufacturers. They also pay different prices for their power. It will be difficult to alter Ontario’s power rates without picking winners and losers.
- The two Ministers described their plan to expand Ontario’s natural gas distribution network. Energy users will be encouraged to switch to natural gas heating. As long as natural gas prices remain at historically low prices, this fuel switching could reduce overall energy costs.
Improving the competitiveness of Ontario’s electricity market won’t just come from moving costs between one set of consumers to another. Reform will be beneficial if it results in making more efficient use of the transmission and distribution networks by everyone.
Government representatives assured the participants they are open to proposed solutions. No explicit dates were announced for the duration of the review. It is generally anticipated, however, that any new directions for Ontario’s electricity market will likely be announced prior to year end.
360 Energy will provide written submissions to the government, to monitor developments and provide updates to stakeholders through this newsletter.
