The 2020s are finally set to begin for large electricity customers enrolled in Ontario’s Industrial Conservation Incentive (ICI) program. Over the past 22+ months, their share of global adjustment costs has been tied to their energy use in pre-pandemic July 2019, but they’ll soon be receiving notice of their updated cost allocation factors along with a June 15 deadline to opt into the program for another year.
The ICI program’s formula for locking in global adjustment (GA) allocations will likely be more favourable for many eligible commercial participants this year since it will be based on their energy use during the five hours of system-wide highest demand between May 1, 2021 and April 30, 2022. Those all occurred during August 2021 and, more importantly, in sync with the protracted period of low office occupancy arising from the COVID-19 pandemic.
That follows last year’s hold-over of old numbers after the Ontario government cancelled the May 2020 to April 2021 cycle of the program. Nevertheless, energy management specialists participating in a webinar sponsored by the Building Owners and Managers Association (BOMA) of Greater Toronto last week stressed the importance of evaluating past and future load pressures before making a decision.
“We’re kind of at the tail end of the pandemic. Things are opening back up again; people are coming to the office, but we don’t know exactly what’s going to happen,” mused Edward Newton, an energy analyst with the consulting firm, Energy@Work. “It seems that there is going to be some kind of hybrid workplace model appearing, which means your kilowatt-hour (kWh) profiles won’t be like what we saw during the pandemic; they won’t be like what we saw prior to the pandemic.”
To qualify for the ICI program, commercial electricity customers must register an annual average monthly electricity demand of 1 megawatt (MW). Known as Class A for purposes of the program, their share of monthly GA costs is prorated to their energy use during the five hours of highest system-wide demand during the period from May 1 to April 30. This is fixed as a consistent denominator, known as the peak demand factor (PDF), for the following 12 months from July 1 to June 30.
After the Class A allocation is subtracted out, non-qualifying customers, known as Class B, pay the remainder of monthly GA costs on a volumetric per kWh basis. In 2021, that averaged about 7.35 cents/per kWh or roughly 72 per cent of the commodity cost of electricity.
If year-over-year occupancy levels don’t decline dramatically during the pending new billing period, from July 1, 2022 to June 30, 2023, many Class A commercial customers could see some savings compared to the previous two years. Newton cited the example of a building with an 800-kilowatt drop in peak demand from its 2019 tally.
“During the current adjustment period, the building is paying according to its peak demand factor that was set in 2019. This is going to result in a much lower PDF and potentially much lower Class A costs,” he affirmed.
However, that’s also to be considered in the context of other price dynamics, including a reduction in GA cost with the transfer of approximately $3 billion attributable to renewable generation contracts to the provincial government, and the rising wholesale price of electricity. The latter averaged about 2.8 cents/kWh in 2021 versus 1.39 cents/kWh in 2020.
“For Class A buildings, the increase in the HOEP (Hourly Ontario Energy Price) is becoming more and more important for managing kWh. It has a bigger impact on the amount you spend,” Newton said.
