The Ontario Government has announced a freeze and a deferral of a portion of Global Adjustment electricity charges for the months of April, May and possibly June.
These changes are intended to help Class A and Class B electricity consumers manage through the disruption caused by actions to contain the COVID-19 pandemic.
Under the Industrial Conservation Initiative (ICI) Program, Class B rates have been frozen at $115/MWh. This represents a reduction from the actual costs that Class B consumers would otherwise have to pay. For example, if the actual Class B rate for these months is $150/MW, the benchmark of $115/MW would represent a 25% reduction. The balance of the deferred costs will eventually be recovered.
Class A rates will also decline by the same percentage reduction each month as class B rates. As an example, if the Class B rate reduction is 25%, Class A customers will get a 25% reduction compared to their actual Class A rate.
This cost deferral program may continue through June, but that decision has not been finalized at this point.
It is important to note that these costs are expected to be recouped by the Ontario government through the calendar year 2021. A methodology to establish repayment terms has not been announced at this time. While the cost recovery will be subject to regulatory approval, these deferred costs will not be charged interest.
A primary reason for a temporary freeze of Global Adjustment charges is to defer anticipated higher electricity market costs over the next few months. The likely impact will be to bring electricity costs higher overall in 2021.
