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What is Ontario's Global Adjustment?

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Ontario consumers that pay the Hourly Ontario Energy Price (HOEP) – or have signed a retail energy contract – have a line on their electricity bill for “the Global Adjustment.”

But, what exactly is the Global Adjustment? 

In 2004, the Ontario Government passed the Electricity Restructuring Act (Bill 100), which reorganized Ontario’s electricity system to address the critical need for new power supply, increased conservation, and price stability for the province’s energy consumers. A key component of this legislation was the Provincial Benefit, also known as the Global Adjustment (GA).

GA is essentially the difference between the average hourly price (spot market price) and the rates (per kilowatt hour) that have been guaranteed to regulated and contracted generators for providing adequate generating capacity to the province. 

The generators who receive guaranteed pricing through this adjustment mechanism – which include the Ontario Power Generation’s (OPG’s) prescribed assets and the Ontario Power Authority (OPA) contracted generation – generate a substantial amount of the province’s power supply, therefore the GA can have a significant impact on energy supply costs for many Ontario businesses.

For businesses, the GA may come as a credit or a charge, depending on whether the market price of electricity is higher or lower than the fixed rates paid to these generators. As a result, the Hourly Ontario Energy Price (HOEP) and the GA have an inverse relationship:  

  • Higher HOEP prices will likely result in the GA being a lower charge or a credit 

  • Lower HOEP prices will likely result in the GA being a charge to customers 

Given this inverse relationship, the GA impacts the final supply costs for businesses as it increases and decreases in response to changes in spot market prices (HOEP). When the spot market price of electricity is lower, the GA is higher in order to cover the additional costs of energy contracts and other regulated generation. It also changes when new generation projects come into service and the contract payments take effect, such as solar and wind projects. 

The GA is paid by or credited to all consumers, but may be invoiced differently, depending on the specific energy supplier. For customers on Regulated Rate Plan (RRP), the GA is included in the rate calculation and not identified separately. For customers paying the average hourly price, as well as those receiving their supply from a retail supplier, the GA is passed through as a line item on their bill, separate from their supply charges.

To learn more about how to manage your cost risk associated with the Global Adjustment and energy price, please check out our PowerAssure two-pager

Stay connected with Direct Energy Business for more market and regulatory developments in Canada. For regular updates, please be sure to subscribe to our weekly market updates.

Posted: October 14, 2015

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