During its throne speech on September 15, 2016, the Ontario
government announced the expansion of its Industrial Conservation
Initiative (ICI), thus giving more businesses access to a program
that allows customers to significantly lower their year-round
electricity costs by reducing consumption from the provincial grid
during times of peak demand.
Ontario's ICI has been in place since 2011, but only certain
types of industrial customers currently qualify for the program,
and only if the customer has an average hourly demand for
electricity in excess of three megawatts (MW).
In September 2016, the Ontario government announced that the ICI
will be expanded to include all types of businesses and the current
three-MW threshold for participation will be lowered. More than 300
businesses already use the ICI and the government expects that over
1,000 new businesses will be eligible for ICI after the program is
HOW CAN THE ICI REDUCE BUSINESSES' ELECTRICITY COSTS?
The ICI program allows businesses to save on the global
adjustment portion of electricity costs — a charge that has
been, by far, the largest component of a typical business'
electricity costs. The global adjustment varies from month to
month, depending on many factors, and in some months customers who
do not qualify for the ICI are paying more than C$100 per megawatt
hour (MWh) of usage (e.g. in April 2016 the global adjustment
charge for non-ICI customers was C$111.32/ MWh).
Non-ICI customers are known as Class B customers, while ICI
customers are known as Class A customers.
Class B customers pay the standard monthly global adjustment
rate on all the electricity they consume in a month (e.g. if a
business uses 1,000 MWh in a month, and the global adjustment rate
is C$100 for that month, the total global adjustment line item on
their bill would be C$100,000 for that month, in addition to
commodity and distribution charges).
Class A customers are charged on a completely different basis.
The global adjustment paid by Class A customers varies
individually depending on the amount of
electricity consumed from the provincial grid during the five hours
in a year when the overall demand for electricity in Ontario was
the highest — those five hours are known as the
"coincident peaks". If a Class A customer is on average
responsible for one per cent of the provincial electricity demand
during the five coincident peak hours in a year, then that
customer's global adjustment rate would be set at one per cent
of all global adjustment costs throughout the following year.
Strategies to Reduce Demand During Coincident Peak Hours
The ICI program allows a customer to reduce its global
adjustment costs by taking steps to reduce the amount of power it
consumes from the provincial grid during the five coincident peak
hours each year (e.g. if a Class A customer uses two per cent of
the provincial demand for electricity most of the time and it can
manage to reduce its average demand from the provincial grid to one
per cent during the five coincident peak hours, it will only be
charged on the basis of one per cent usage for the next year).
Class A customers employ a variety of strategies to chase the
coincident peaks, and thus reduce their costs. Ontario's
Independent Electricity System Operator publishes real time usage
information that allows customers to estimate when the coincident
peaks are likely to occur, and Class A customers can take steps to
reduce their usage of electricity withdrawn from the provincial
grid during those times. Even if a customer has very little ability
to reduce its overall consumption during the coincident peaks, it
may still reduce its global adjustment charges by obtaining power
from a source other than the provincial grid during the coincident
Businesses that currently do not qualify for the ICI program,
but still use a significant amount of electricity should look at
whether they may be able to reduce their electricity costs by
participating in the ICI program after it is expanded.
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