Electricity pricing refinements could be in the offing for the predominant share of Ontario’s commercial ratepayers who don’t qualify for possible cost savings through the Industrial Conservation Initiative (ICI). A newly launched public consultation asks for input on a potential option for allocating the global adjustment (GA) to designated Class B consumers with average monthly peak demand of less than 1,000 kilowatts (kW).
Currently, Class B pays for this bucket of supplementary commodity costs — which include contracted generation, infrastructure expansion and refurbishment and conservation programs — on a volumetric, per kilowatt-hour (kWh) basis after Class A’s portion is subtracted from the tab. Aside from longstanding contentiousness about the formula’s fairness, it makes for a volatile budgetary outlook.
During the first 11 months of 2025, for example, the monthly GA rate for Class B consumers fluctuated from a low of $0.003 cents/kWh in February to a high of $0.1349/kWh in May. In contrast, the consultation proposal sketches out the broad outlines of a voluntary alternative time-of-use (TOU) scheme that would introduce three different fixed rates tied to defined peak, mid-peak and off-peak periods of the day.
“By aligning prices more closely with the costs that consumption imposes during different periods of the day, the proposed Class B TOU pricing structure is intended to encourage participating customers to shift electricity use away from peak demand periods,” states the explanatory summary on the Ontario government’s regulatory registry. “This approach may appeal to customers who value predictability and certainty while seeking additional tools to manage their electricity costs.”
This would be “conceptually aligned” with the TOU rates that residential and small business customers pay under the provincial regulated price plan (RPP). In that case, peak, mid-peak and off-peak prices are fixed for a 12-month period, but the designated hours for peak and mid-peak prices differ in the warmer months from May 1 to Oct. 31 and colder months from Nov. 1 to April 30. Off-peak hours are consistently pegged from 7 p.m. to 7 a.m. throughout the year.
Sharpening price signals
The provincial consultation follows a multi-year exploration of the issue, first hinted in a 2017 update to the former Liberal government’s long term energy plan. In 2019, an Ontario Energy Board (OEB) research paper discussed some possible approaches, but efforts to test them through a pilot project floundered when no candidates applied to participate. The OEB subsequently proceeded with research and stakeholder consultations before submitting a report to the Ministry of Energy and Mines in late 2024.
That report presented two options for consideration:
- the TOU scheme with guaranteed GA rates for each period;
- or a real-time price (RTP) in which the GA would change hourly in sync with actual province-wide demand.
Related background for stakeholders acknowledges that the RTP is the more precise conveyance for costs, but it is also more complex to administer and understand.
“Cost-reflectiveness and simplicity/acceptability are both important aspects of rate design. However, satisfying one typically involves a trade-off with the other,” the OEB observes.
A recent assessment of the effectiveness of current price signals, which the OEB and the Independent Electricity System Operator (IESO) jointly commissioned, concludes that more could be done to encourage Class B consumers to adopt various load-shifting technologies and practices that are collectively known as distributed energy resources (DERs). Researchers’ recommendations include both real-time pricing for the global adjustment and “cost-reflective” allocation of transmission costs, linked to peak demand.
“Current GA cost recovery for non-RPP Class B customers is not cost-reflective because costs are recovered through a flat volumetric charge that varies on a monthly basis. The OEB should explore additional energy supply rate structures for non-RPP Class B customers, where each cost component is recovered using its own appropriate billing determinant,” the August 2025 report from the Brattle Group states. “The two-part demand charge to recover transmission costs for transmission-connected customers sends an appropriate and efficient price signal, and similar cost-reflective designs should be available for distribution-connected Class A and non-RPP Class B customers.”
For now, the Ontario government appears to be pursuing the simpler path. The consultation poses questions for both prospective adopters of the optional pricing scheme and the local distribution companies (LDCs) that would be tasked with implementing it.
Consultation agenda
On the customer side, respondents are asked whether a TOU pricing approach would motivate them to shift energy-intensive consumption to off-peak hours, and to weigh in on the “ideal” price differentials for the three rate periods. The questioners also seek input on communication strategies and supports that could help customers “see the link between their behaviour (load shifting) and their bill savings”.
Knowledgeable onlookers suggest that a more discernible difference in the rates than the 2:1 ratio between peak and off-peak employed in the RPP’s time-of-use rate model will be needed — perhaps a differential more in line with the 10:1 ratio that comes with Ontario’s voluntary ultra-low overnight rate for RPP consumers.
“I am not confident that the rates structure causes a change in behaviour when it is optional,” says Andrew Pride, an energy management consultant specializing in sustainability and strategic conservation planning. “The way to make it valuable is to mandate it, or to set the peak rate very high and off-peak very low, which could motivate customers to shift consumption if it is in their control.”
Research conducted for the OEB identifies “likely adopters” as:
- larger customers that could achieve at least a 5 per cent saving on annual electricity costs that typically exceed $150,000; or
- smaller customers that could realize a minimum of $1,000 in savings on annual electricity costs that are typically lower than $150,000
simply due to their energy load profiles, and without having to actively respond to the new price signals. That hypothesis is “conditional on the assumption that they are adequately informed of the benefits these plans offer them”.
Another consultation question is aimed at gauging wider interest in the TOU rate structure from Class A consumers (with average monthly demand of at least 1,000 kW) that might choose to opt into Class B, or from bulk-metered multifamily buildings, small businesses and farms that are billed under the RPP. However, that’s likely to be difficult to foretell before actual rates are announced.
“The potential value for customers will depend heavily on the design details and how complex the implementation requirements become relative to the resources available to support them,” observes Scott Rouse, managing partner with the consulting firm, Energy@Work. “For Class B customers, the real thing they can do is get an energy management action plan together to reduce the kWh of consumption. Under the current scheme, that’s their best option. Time-of-use for GA — it’s not so clear what the benefits might be.”
The consultation also seeks feedback from LDCs about the potential costs and complications related to integrating a TOU rate model into their data management and billing systems. On that front, Rouse notes the already existing discrepancy in capabilities among Ontario’s 60+ LDCs, which leaves some customers still struggling to get access to their meter data.
“They’re supposed to have green button and they’re supposed to make the data available, but it’s not uniform,” he says. “In theory, the green button is there.In practice, it can still be very difficult to get your data.”
Nevertheless, he calls the consultation, which will be open for comments until January 23, 2026, a worthwhile exercise.
“The positive takeaway is that the Ministry clearly recognizes the importance of customer choice, the need to control electricity costs and the growing role of real-time data and analytics,” Rouse maintains. “This aligns with the broader evolution of the industry and the tools that many commercial buildings are slowly adopting.”
