Ontario Global Adjustment Fee

If you are a home or a business owner living in Ontario, you probably noticed an additional fee to your electricity bill, mysteriously referred to as “Global Adjustment”.  This is a new initiative, which was included in Ontario’s 2009 Green Energy Act.

So what is the Global Adjustment Fee and why have you been paying it for over a decade? The fee was added in order to bridge the gap between the Hourly Ontario Energy Price (HOEP) and payments for maintaining and building new electricity infrastructure in Ontario as well as to regulate rates for Ontario’s power generating stations.

The fee is also used to cover the cost of Ontario’s electricity conservation programs. This is important because it will ensure there is enough electricity to cover the long-term needs of residents.

The fee fluctuates and changes from month to month based on consumer usage. Usually when the HOEP is lower, the Global Adjustment Fee (GAF) tends to be higher since it has to cover the costs mentioned above. When new initiatives, projects and programs are launched, the GAF tends to creep up as well, again to cover the additional costs. While large businesses and manufacturers see the GAF as a separate fee on their electrical bills, residential customers and small business owners do not. For them the Global Adjustment Fee is couched within their kilowatt per hour charges.

The larger power consumers are divided into two different consumer classes:

  • Class A: this class of consumers on average have a peak demand of 5 megawatt or more and are part of the Industrial Convention Initiative. Class A consumers pay the Global Adjustment fee based on how their usage contributes to Ontario’s peak demands.
  • Class B: these consumers pay the Global Adjustment fee through regular billing cycles with their local power company. Their peak demand ranges anywhere from 50 kilowatt to 5 megawatt.

A big criticism against the Global Adjustment Fee and bone of contention for many consumers is the fact that Ontario sells billions of kilowatt hours of electricity to cities in the United States at a fair market price which results in the province losing billions of dollars every year. For example, in 2015, more than 22.6 billion kilowatt hours were sold to New York and Michigan at market price and this resulted in a $1.7 billion loss for hydro consumers in Ontario. In another example, solar producers were paid $0.80 cents per kilowatt /hour for energy production (even though the market rate per hour of kilowatt is 2.36 cents), the difference of 0.78 cents had to be absorbed through the Global Adjustment fee.

The organization, Independent Electricity System Operator (IESO) manages the energy system in Ontario. Data provided by them to Global News indicated that on average 7.9 cents per kilowatt an hour was paid in fees by small business owners and residential customers in the province. In layman’s terms, this means when a customer paid a $100 hydro bill, the actual cost of their electricity usage was $23 while the remaining $77 paid was the Global Adjustment Fee.

When you start adding up all the little things, it’s a hefty price tag for consumers to pay on top of delivery fees, administrative fees, income tax as well as the harmonized sales tax.

Conservation programs have also been criticised since a drop in energy consumption means an increase in Global Adjustment fees in order to cover the difference.

However, since the Global Adjustment fee is clearly here to stay, consumers are looking at ways to save some money through peak shaving by trying to decrease use of electricity in peak periods or using on-site generators and carefully tracking usage data to see how and where consumption can be trimmed or lowered without negatively impacting your business or life.

While paying additional fees on a monthly basis is not fun for anyone, it’s important to remember that in the long run, the Global Adjustment fee is designed to improve energy efficiency and be more cost effective and in the meantime as a consumer forking over a lot of money towards an arbitrary fee, exploring other cost saving options may be a good idea.

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