A few dollars more: ordinary electricity customers pay for new conservation measures

Ontario’s Class B ratepayers will be digging deeper into their pockets to find more dollars to help universities, hospitals, court houses and other public buildings pay their electricity bills.

That fact has not been formally announced by the Ontario government; however, the IESO 18-month outlook said this about the Industrial Conservation Initiative or ICI.

“The changes to the ICI program this year have opened the door for participation from the commercial sector. Hospitals, office buildings, hotels, universities and other large commercial buildings with peaks greater than 1 MW can now minimize their electricity costs by shifting loads during the ICI peak day periods. The success of these changes from the perspective of the commercial sector comes back to their load flexibility and their ability to follow the system peaks. The commercial sector impacts are not visible to the IESO as all of these participants would be distributor customers. The ICI program is estimated to have reduced peak demand by about 1,300 MW in the summer of 2016 and with the changes to the program the expectation is that those savings will have increased in 2017.”

What does this change in the ICI program do? It allows public and private entities to pick the highest five peak demand hours in a year (or come close to the five highest) in order to receive subsidized electricity rates. The subsidy is basically a transfer of costs from the Class A ratepayers to the Class B ratepayers—Class B being ordinary folks like you and me.

Class B ratepayers are all residential households along with thousands of small businesses and franchised businesses (who are also struggling with how to manage the increase in the minimum wage which came into effect January 1, 2018).

In 2017, the ICI transfer added $1.2 billion to the costs of electricity for Class B ratepayers while reducing the Class A costs by the same amount. The addition of the business option to choose the ICI program is substantial and will increase the subsidy, but it doesn’t appear the Energy Ministry has bothered to provide that information, or completed a cost/benefit analysis to assess the effects.

Scott Luft noted the ICI cost shift for 2017 in a Tweet a few days ago:

Cold Air‏@ScottLuft Jan 6

yesterday I noted an ICI Hi5 hour being set – and noting the program shifted about $1.2 billion from large to small consumers in Ontario last year. Today’s hour 18 may also end up in the Hi5”

So, reducing “peak demand” by 1,300 MW for five hours is equal to 6,500 MWh and cost $1.2 billion, making the cost of reducing “peak demand” $184,615 per/MWh! ($1.2 billion divided by 6,500MWh).

We should expect this Class B to Class A shift to increase substantially in 2018 as the effects of lowering the ICI to the lower level of 1MW will provide an incentive to those who qualify.

If you happen to be in a hospital or university and notice the lights suddenly dimming you can guess it is probably one of the anticipated high five hours.

It also means, your electricity bill just went up.

Parker Gallant