Ontario’s Wholesale Electricity Market is where billions of dollars of energy sales take place annually. The electricity pricing is managed through a convoluted trading process that does not reflect actual generating costs. Market participants purchase energy below cost but must compensate by paying an additional ‘Global Adjustment’ upon settlement. If you are a small business, farmer, seasonal or residential customer with regulated pricing you are paying 5 times the Wholesale Market price because the Global Adjustment is built into your rate.
The Market has been in place since 2002 and has become increasingly dysfunctional due to changing economics and government meddling which has undermined its functionality. While it does function sufficiently to maintain supply and reliability it does not attract any new generation, manage generation dispatch through market pricing or accurately reflect the price of energy paid to generators.
In the last 10 years it has become so dysfunctional that generators can bid such that they appear willing to pay customers to use their output while they are subsequently paid-out to maintain their profit through the settlement process. This practice allows more costly generation to be scheduled ahead of lower cost sources by ‘gaming’ the price offers.
Where does the payout come from?
All electricity consumers pay through the ‘Global Adjustment’.
Wholesale Market participants including large industrial customers and energy resellers pay the Global Adjustment as a separate item from energy prices (less than 2 cents/kWh) while regulated energy customers have it built into their charges of over 13 cents/kWh (peak TOU rate) to cover the cost.
In Ontario large industrial customers may qualify for a lower Global Adjustment when they meet specific load and conservation criteria.
Now that we have a new government in place and a Market redesign underway there is ample opportunity for billing relief for many Ontario ratepayers. It all comes down to who makes the most noise. The squeaky wheel.
I have put together a very brief explanation of the Market in a new article “Ontario’s Wholesale Electricity Market for Dummies”. It should take less than 5 minutes to go through and is intended to provide a high level understanding of how the market works and how we got to this untenable situation.
I hope you take the time to have a look at it.
It won’t change your life but it will make you more knowledgeable on this topic than 99% of Ontario residents and 100% of politicians. Not to mention, a big hit at political social events and parties!
It also gives you some idea of what you should be complaining about to your elected MPP that would actually make a difference to your electricity bill.
You have an elected Member of Parliament at your service.
Prepare yourself with knowledge.
Make yourself heard.
Derek
