As a new business owner in Ontario, understanding HOEP and global adjustment rates on a larger scale can be difficult to navigate. Managing energy costs, along with a myriad of other operating charges, may require some research before you know exactly what you are allocating money to each month when your hydro bill is due.
To break down some of the charges, here is a guide to wholesale electricity that will explain some of the unfamiliar terms you may come across as a business owner.
The HOEP is the hourly price that is charged to local distribution companies (LDCs) and other non-dispatchable loads. HOEP is also paid to self-scheduling generators. HOEP forms the basis of the commodity charges in the retail electricity market.
Global Adjustment (GA)
In 2006, the government introduced Global Adjustment (GA) to help Ontario cover the difference between electricity market rates and the rates provincial leadership agreed to pay for new generators as a way to provide adequate generating capacity and conservation programs throughout Ontario. The GA is a surcharge which is calculated by taking the difference between market wholesale prices and the fixed price of energy.
Class A Customers
Class A customers pay global adjustment rates based on their percentage contribution to the top five peak Ontario demand hours over a 12-month period. Customers participating in this initiative are referred to as Class A.
Class B Customers
If you are a Class B customer, you are generally comprised of small and mid-sized commercial buildings. Customers with a peak demand of 50 kilowatts (kW) and up to and including 5 MW will typically pay the global adjustment through their regular billing cycle with their local distribution company − these customers are referred to as Class B.
These charges make up the costs of delivering electricity from generating stations across the province to your business. Some of the delivery charges are “fixed,” while other charges vary depending on how much electricity your operation uses. Delivery charges may include: customer service charges, distribution charges, and transmission charges.
Sometimes you’ll notice charges that are grouped together under the line item called Regulatory Charges. These charges can include the Wholesale Market Service Charge which includes the charge of services provided by the Independent Electricity System Operator (IESO) to operate the wholesale electricity market and maintain the reliability of the high voltage power grid. The Ontario Energy Board sets the wholesale market service charge.
The takeaway: As a business owner, the more you know about your hydro rates, the easier it will be to make informed decisions about your energy usage and how to cut down on operating costs.