Ontario’s Lock-down is Bad News for Small/Medium Sized Businesses

IESO has just released their March Monthly Market Summary and it hammered Ontario’s small and medium sized businesses where 42% (2..4 million) of Ontario’s private sector employees work, according to the CFIB (Canadian Federation of Independent Business).

The lock-down imposed by the Ontario and Federal governments, related to the pandemic, has driven down electricity consumption in the province with March being an early warning to the extended shutdown.  The March 2020 Monthly Market Summary when compared to the March 2019 summary indicates an overall drop in consumption of 5.7% or 669.3 GWh* (gigawatt hours) and 86.6% (580 GWh) of the drop was by Class B ratepayers.

While consumption dropped, Ontario’s net exports increased from 2019 by 664.1 GWh but as we ratepayers know that is not a good thing as those exports are sold at the market price or HOEP which fell 49% from an average of $27.34/MWh in 2019 to $13.93/MWh in 2020.  What that means is even though net exports increased by 80% revenues decreased from $22.7 million to $20.8 million. That implies; because of the way energy costs are allocated in Ontario, generating excess power (principally wind and solar) and selling it to our neighbours is akin to simply giving it away.

Now looking at the cost of consumption in the province and the transfer of support from Class B to Class A ratepayers the results are worse.  In March 2019 Class B ratepayers consumed 8.629 GWh and the GA (Global Adjustment) costs were $692.2 million meaning the average GA per MWh was $80.41/MWh and the HOEP added $27.34 making the overall cost of a MWh/$107.75 (10.7 cents/kWh). In 2020 it grew to a GA of $119.42/MWh and with the HOEP of $13.93/MWh added, it came to $133.35/MWh (13.3 cents/kWh) or an increase of $26.60/MWh.  Class A ratepayers on the other hand had an all-in rate in 2019 of $75.76/MWh and $75.87/MWh in 2020, an increase of only 9 cents/MWh.

Included in the Class B customer base are all residential customers (and farmers) but the Ford Government froze those rates at 10.1 cents/kWh due to the Covid-19 pandemic.  The government did nothing for all of the remaining small and medium sized Class B businesses who are shouldering more than just high electricity rates due to the lock-down.  Their livelihood is at stake!

How can the government expect Class B small and medium sized businesses to continue to support the larger Class A customers via the cost shift and hope they will survive the pandemic?

The time has come for the province to recognize how important to Ontario those businesses and their 2.4 million employees really are! Either they should fix the mess those contracted wind and solar generators have created, amend the methodology of the Global Adjustment, or, offer relief to the rest of the Class B ratepayers.

April looks to be even worse for those businesses so the Government should fix it now!

 

*A GWh is 1,000 MWh and the 669.3 GWh is what 890,000 average Ontario households consume monthly.

Author: parkergallantenergyperspectivesblog

Retired international banker.

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