Canada: Ontario’s Global Adjustment: A Tale Of Two Classes

Last Updated: April 12 2013
Article by Shane Freitag, John Vellone and Whitney Bell

Most Read Contributor in Canada, September 2016

In 2005, the Province of Ontario added the Global Adjustment to electricity consumers' bills in order to stabilize the price of electricity from specified electricity generation and other initiatives. Owing to the large increase in these electricity initiatives, the amount of the Global Adjustment has continued to increase despite the hourly price in Ontario remaining low. This has and continues to cause confusion in the electricity marketplace among various classes of consumers.


The Global Adjustment, formerly known as the Provincial Benefit, was introduced into Ontario's electricity program in January 2005 to ensure reliable, sustainable and diverse supply of power at stable, competitive prices.

Global Adjustment (GA) dollars fund three categories of electricity initiatives: (i) regulated rates set by the Ontario Energy Board for Ontario Power Generation Inc. (OPG) nuclear and base load hydroelectric generation; (ii) fixed payments to existing generators that have contracts with the Ontario Electricity Financial Corporation; and (iii) fixed payments to new generators and parties providing conservation and demand management that have contracts with the Ontario Power Authority.


The province wide GA amount paid in Ontario is correlated to the difference between the per kilowatt hour (kWh) fixed price for regulated and contracted generators and the actual market price for electricity. As a result, the GA may either be a charge or a credit to electricity consumers depending on the market price relative to the fixed price to generators. If the market price is lower than the fixed price, then the consumer will be charged for the difference. While not determinative, in general terms the lower the market price, the higher the GA charge. If the market price is higher than the fixed price, then the consumer may receive a credit for the difference.

Local Distribution Companies (LDCs) charge (or credit) consumers for the GA on their electricity bills. The Independent Electricity System Operator (IESO)provides LDCs with GA estimates three times each month. The first estimate is published on the last business day of the month, for the next month. The second estimate is published at the end of the month on the last business day. The final GA rate is published at the middle of the following month. The consumer is charged the amount that corresponds with the estimate published in its billing cycle.

In the case of generators holding contracts with the Ontario Power Authority, any shortfall in the fixed contract payment to these generators is paid by the Ontario Power Authority and then subsequently charged to consumers through the GA mechanism. Any surplus is returned to consumers by the same mechanism. As reliance on higher-priced renewable energy increases, it could be argued that the GA protects consumers against upward movement in spot market prices. However, not only have credits been few and far between since the inception of the GA, but since 2009 the amount of the GA charged to consumers has at times been greater than, and is often rivalling, the actual cost of the commodity for electricity.

The following graph illustrates the recent trend of increasing GA charges as compared to falling market prices. In general, the total effective price paid for electricity is equal to the sum of the spot market price (HOEP) plus global adjustment plus uplifts.

Figure 1: Monthly Average Effective Price May 2005 to April 2012 ($/MWh)

1. Excerpted from the Ontario Energy Board's Market Surveillance Panel (see "Monitoring Report on the IESO-Administered Electricity Markets" (January, 2013), online: Ontario Energy Board (


Prior to 2011, the system-total of the GA program cost was allocated to all consumers on an electricity consumed, or "postage stamp," basis. Every month the IESO would determine how much it owed to cover all GA initiatives, and divided this amount by the actual MWh demand in Ontario to calculate how much to charge each consumer on a per MWh basis.

On January 1, 2011 amendments to the relevant regulations changed the way the GA is allocated. These amendments introduced two classes of customers: Class A (large volume) consumers and Class B (lower volume) consumers.

Class A consumers are those with an average monthly demand of over 5 MW. Each Class A consumer is required to pay a portion of the total GA charged to all consumers based on the proportion of electricity it consumes during Ontario's five demand peak hours in the previous year. If during these five peak hours a Class A consumer uses 1% of the total demand for electricity during these five hours, then they will be responsible for paying 1% of the system-wide GA charge in the next "settlement" (or payment period). Class B consumers are then left to pay the rest of the system-total GA costs on a postage stamp basis.

The regulation that introduced this dual class structure provided an opt-out period, wherein large volume consumers could opt out of Class A to retain their Class B classification. The regulation originally provided that mandatory participation in Class A for average monthly users of 5MW of electricity was to commence in the July 1, 2012 to June 30, 2013 settlement period. However, as of June 1, 2012, a new regulation has extended this opt out period, such that large volume consumers can continue to be charged on a postage stamp basis on an indefinite basis if they wish.


This change in cost allocation can have significant cost advantages for Class A customer if they manage to shift their demands to lower demand periods, thereby reducing their peak demand factor. For example, if Class A customer were to use no electricity at all during the five peak hours, they could avoid paying the GA costs all together. Class B customer do not have this same opportunity, and they continue to pay towards the system-total on an electricity consumed basis, regardless of how much (or little) electricity they consume during peak hours.

For instance, the Market Surveillance Panel reports that "[t]he average effective price for all Ontario customers during the 2011/12 Annual Period was $72.64/MWh. On average, Direct Class A customers paid $17.45/MWh less than this price while Class B customers on average paid $3.24/MWh more than this price."

Figure 2: Effective Electricity PriceJanuary 2011 to April 2011 and January 2012 to April 2012 ($/MWh)

2. Excerpted from the Ontario Energy Board's Market Surveillance Panel (see "Monitoring Report on the IESO-Administered Electricity Markets" (January, 2013), online: Ontario Energy Board (


This new structure has increased the burden on Class B customers. In 2012, Class A customers paid 52.13% less in GA costs than Class B customers. Because Class B customers are responsible for making up the shortfall between the total GA charge and that paid by Class A consumers, they footed the bill for this difference. It is not surprising that the Market Surveillance Panel has noted that the effective price for Class A customers was lower in 2012 but the effective price for Class B customers was higher, which was mainly due to a substantial increase ($15.75/MWh) in the GA allocated to Class B customers.

A study completed by Aegent for Canadian Manufacturers and Exporters shows that the annual GA costs will rise to over $10 billion dollars in 2015. Without this dual class structure, the study estimates a GA cost of $70 per MWh. But under this dual class structure, Class A consumers will pay $46 per MWh, realizing a saving of $24 dollars per unit, while Class B consumers will pay $73.90 per MWh, absorbing the costs that Class A consumers avoid under the new structure. In 2011, the spread between the GA paid by Class A and Class B consumers was $11.70 per MWh. Under this estimate, however, the spread will be increased to $27.90 per MWh, demonstrating the significant impact that the new cost allocation system is having on low volume consumers of electricity in Ontario.


Retail contract consumers, those who have signed a contract with a licensed electricity retailer, will pay an adjustment equal to the Class B customer GA amount. Similarly, businesses and organizations that do not qualify for the Regulated Price Plan, those who pay the market price for electricity but do not qualify as a Class A customer or are connected to the distribution system, will similarly pay an adjustment equal to the Class B customer GA amount. For both these types of consumers, the GA charge shows up as a separate item on the electricity bill.

However, Class B is largely comprised of Regulated Price Plan (RPP) consumers. The GA charge is reflected differently on electricity bills for this sub-category of Class B consumers. RPP customers, usually residential consumers and small businesses, are governed by a regulation that entitles them to pay a fixed price for electricity unless they opt-out of the RPP by entering into a contract with a licenced electricity retailer. The GA is factored into the fixed RPP rate that is set by the Ontario Energy Board from time-to-time. This GA charge is, therefore, blended into the total price and does not show up as a separate item on the electricity bill.


Understanding what class and sub-category you fall into will help you discern exactly how much of your monthly electricity payments are being allocated to the GA initiatives. While Class B consumers cannot use peak demand avoidance strategies to reduce the amount they pay towards the GA, Class A consumers can readily take advantage of this mechanism. Understanding your electricity demands and developing strategies to adjust these demands is an important step in reducing Global Adjustment costs.


1. For the purposes of this article, Class B customers are deemed to include all Class A customers that are connected to the distribution system rather than directly to the IESO grid (also known as non-direct Class A customers).

About BLG

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.