Global Adjustment: How a Change in Regulation Could Mean Big Energy Savings for Ontario Businesses
Thanks to a recent change in regulations, more businesses in Ontario now have the ability to strategically reduce their energy bill.
Effective January 1, 2017, the Government of Ontario lowered the eligibility requirement for businesses to opt in to the Industrial Conservation Initiative (ICI). ICI participants, known as "Class A" customers, are assessed Global Adjustment based on their percentage of demand during the top five peak hours in Ontario over the previous 12-month period from May through April. Now, as a result of the change in the law, businesses only need to meet a 1 MW demand threshold to qualify as Class A electricity customers, down from the previous minimum of 3 MW. If your business meets this requirement and can keep its demand low during these five one-hour periods, you could significantly reduce your energy bill for the entire year.
However, it’s a little more complicated than that, so here’s a breakdown to help answer some of your questions.
What is Global Adjustment and How Does it Work?
All energy consumers in Ontario—residential, commercial, and industrial—are charged Global Adjustment, which the government uses to cover the cost of building new electric infrastructure in the Province and to fund conservation programs.
In fact, Global Adjustment is currently the largest line item on most customers’ electricity bills, and can account for as much as 70% of the bill for some. At roughly $500,000 per MW-yr, Global Adjustment charges are among the highest electrical demand rates in the world, and they are forecast to increase even more as Ontario makes further strides toward greening its grid.
Class A customers are the largest electric users in Ontario, and they are assessed Global Adjustment based on the percentage that their peak demand contributed to the top five one-hour system peaks on an annual basis. So, for example, if a Class A customer’s contribution to Ontario’s peak demand is 1% of all five one-hour peaks during the base period, they will be assessed 1% of the total Global Adjustment costs through the subsequent 12-month billing period. The metric used to assign the portion they owe is called peak demand factor, and customers are notified of this annually by their distribution company.
Customers can significantly reduce their Global Adjustment charges for a full 12 months by minimizing their peak demand factor. Organizations that reduced demand by 1 MW during each of the five system peaks in the previous base period will save more than $500,000 in Global Adjustment charges over the following 12 months.
How Can Your Business Save Money?
So, how do you minimize your peak demand factor? Anticipating system peaks requires a great deal of precision. Simply trying to guess when system peak occurs can be difficult, and could even put your business at risk for some serious consequences if it’s not done correctly.
Enel X’s system peak predictor program forecasts the likelihood that system peak will occur each day, based on proprietary predictive analytics and the work of our expert energy analysts monitoring weather and market data.
When the likelihood of a system peak is high for our customers' sites, we notify participants to implement an energy curtailment plan that our experts develop specifically for those sites, which will reduce demand without disrupting operations.
If you’re eager to lock in savings on your energy bill and your business qualifies as a Class A customer, managing Global Adjustment is an easy start. Get in touch and we’ll start by performing a tariff analysis to assess your eligibility and determine whether your business could stand to benefit from participating in the ICI.