Businesses and public sector customers that use more than 250,000 kilowatt-hours (kWh) of electricity per year (or more than $2,000 per month for a typical electricity bill) pay the wholesale electricity price through their local distribution company. They are also subject to a separate charge called the Global Adjustment. Here is a guide to electricity charges that apply to business consumers.
Although each local distribution company (LDC) in Ontario uses a slightly different bill format and terminology for its business customers, two basic principles are common to all. Your electricity costs and adjustments are based on energy use/consumption and peak demand.
Charges Based on Energy Use/Consumption
These charges are based on overall energy consumption during the billing period, measured in kilowatt-hours (kWh).
Electricity Commodity Charges
This is the cost of the electricity supplied to you. You can buy your electricity through your LDC, or choose a retailer licensed by the Ontario Energy Board (OEB). Most medium and large businesses pay the hourly price, unless they have signed a contract with a retailer.
These businesses use interval meters, similar to smart meters, that track how much electricity they use on an hourly basis, or in some cases, every 15 minutes. The customer is then charged the Hourly Ontario Energy Price (HOEP) for electricity based on their hourly usage.
Businesses without interval meters instead pay a weighted average of the hourly price, based on the consumption patterns of similar consumers in their area, rather than just their own usage. These consumers may also choose to move to a fixed-price contract offered by a retailer.
Other line items on your bill that are based on total consumption include:
Line Loss: When electricity is delivered along distribution lines, not all of it reaches its destination. For example, when electricity moves along the wires, some of it is lost as heat. This difference is typically shown on bills as metered usage and billed usage.
Businesses can track the hourly electricity price on the Power Data page as well as refer to historical prices.
Global Adjustment: The Global Adjustment accounts for differences between the market price and rates paid to regulated and contracted generators as well as conservation and demand management programs. Appears as a separate line item on your bill.
Wholesale Market Services Charge
This charge includes the cost to operate the wholesale electricity system, administer the electricity market, and maintain the reliability of the provincial grid. These rates are set by the OEB and include the Wholesale Market Service Charge. These costs include:
Physical Limitations and Losses: These are losses that occur as electricity flows across transmission lines. The IESO also collects other costs incurred in operating the power grid, such as when it must take actions to avoid overloads on the transmission system in cases of surges in demand.
Energy Reliability: There may be occasions when the balance between generation and demand is affected by an unanticipated event, such as equipment failure or a surge in consumption. The IESO purchases a certain level of spare capacity or reserve that is available on short notice to restore the balance.
IESO Administration Service: The IESO charges an administrative fee to manage the power system and operate the wholesale electricity market in Ontario. The rate is less than one-tenth of a cent per kilowatt-hour.
OPA Administration Fee: This fee pays for the administration costs of the Ontario Power Authority (OPA). The OPA's mandate includes planning for generation, demand management, conservation, and transmission in Ontario. This fee does not include the costs payable under contracts for generation supply or for delivery of conservation and demand management programs entered into by the OPA.
Rural and Remote Electricity Rate Protection: This charge is also included and is used to partly offset the higher cost of providing electricity in rural and remote areas of the province. The Rural and Remote Electricity Rate charge of 0.12 ¢/kWh is in effect as of January 1, 2013.
Debt Retirement Charge
This charge of 0.7 cents per kWh has been set by the Ontario Ministry of Finance to pay down the residual stranded debt of the former Ontario Hydro.
Charges Based on Peak Demand
These charges are based on the highest electric demand reading during a specified period, measured in kilowatts (kW) or kilovolt-amperes (kVA).
These regulated charges are required to cover the capital and operating costs of Ontario's high-voltage electricity grid.
Transmission Connection: Your LDC is connected to the transmission system and the electricity has to be transformed to lower voltages before your business can use it. This charge covers the cost of doing this.
Transmission Network: This covers the cost of operating and maintaining the towers, wires and other equipment used to deliver electricity from where it's generated to your LDC.
Transformer Credit: Customers who own and maintain their own transformers that connect them to the power grid receive this credit.
Distribution: This rate, regulated by the OEB, covers the cost of delivering electricity from the transmission system to your business. The charges go to your LDC to build and maintain the distribution lines and equipment.
There are some fixed charges on the electricity bill that are not affected by consumption or demand levels:
Standard Supply Service Charge: This charge is designed to cover your LDC's administrative costs to provide electricity to customers who buy their electricity from them, instead of a licensed electricity retailer. These rates are set by the OEB.
Customer Service: This fixed monthly charge covers your LDC's administrative costs such as meter reading, billing and customer service.
Participating Directly in the Electricity Market
Large consumers can also participate directly in the IESO-administered market. All companies that are directly connected to the grid buy electricity through the market.
Some large customers may also opt to become dispatchable loads, where they adjust their energy use in response to dispatch instructions from the IESO. Dispatchable loads are also part of the operating reserve market — which provides payments to customers for offering their additional supply to the grid.