The Class A cost transfer

Parker Gallant has a new post covering the Industrial Conservation Initiative (ICI), or Class A Global Adjustment mechanism: Ontario’s class distinction stings ordinary hydro customers.

 In early 2010, then Minister of Energy Brad Duguid issued a directive to the OPA (Ontario Power Authority) instructing them to create and deliver an “industrial energy efficiency program” specifically for large transmission connected (TX) ratepayers.

That directive led to the creation of the two classes of ratepayers that now exist in Ontario.

It’s an appropriate time to revisit the topic because this past week Ontario’s Minister of Energy was touting the electricity cost-saving opportunities for businesses that qualify for participation in a newly expanded ICI, because those savings come from shifting costs to other consumers.

If you are unfamiliar with the topic the latest article may inspire you to learn more, I recommend some articles for doing so at the end of this short post.

One statement Parker makes is not entirely correct: “IESO did not start disclosing the consumption by ratepayer class until 2015.” While they did not publish the data to their website, they did share it with those who asked.

chart (1).png

I quickly pulled some data and summarized 12-month running totals to illustrate the cost impacts on remaining consumers of saving ICI/ClassA participants costs. As Parker noted, those costs are now over 1 billion a year.

chart (2).png

The rate impact on non-ICI participants is now greater than the hated 0.7 cent/kWh ($7/megawatt-hour) Debt Retirement Charge. I estimate it added 0.9 cents/kWh over the past 12 months, but in recent months has been adding over 1 cent/kWh.

The program expanded on July 1st, so cost shifting is likely to increase both in size (more dollars from Class A to others) and scope – as others transfer the costs to ratepayers in future years.


 

Related:

“Stakeholders” destroying the viability of Ontario’s electricity market, May 2015 – my major work on the topic.

Power Exports at What Cost?
How Ontario Electricity Customers Are Paying More to Dump the Province’s Excess Power , September 2016 – because the savings opportunity of the ICI demands a low market rate, the mechanism is linked to selling exports cheaply. This paper from Brady Yauch and Scott Mitchnick is a good primer.

Ontario Electricity – The Liberals Giveth and Taketh Away, October 2016. Bruce Sharp.

 

 

spreadsheet.
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