The energy market is changing in Ontario, and what that means for commercial energy consumers can be a significant change. Our article below will touch on what changes are made, what it means, why it’s happening and more points of interest that are beneficial to any consumers curious about the changes that have been made in Ontario and across Canada.
What’s changing and what’s staying the same?
The renewed market includes a day-ahead market, which will provide greater operational certainty to the IESO, Ontario’s system and market operator, and greater financial certainty to market participants, including generators, traders, and large users of energy, as it commits to supply with more advanced notice. It also introduces local, or locational marginal prices, to better reflect the cost of electricity based on system conditions and the availability of transmission capacity.
This change will also help drive a better understanding of where new supply is needed most, as it shows the true cost of electricity at a given location. These prices only apply to those generators and some customers who participate in the IESO wholesale market as well.
Energy bills will look the same. The full commodity price for electricity will continue to be made up of the market price and the Global Adjustment. The GA covers the cost of new electricity infrastructure, regulated rates paid to generators under contract and the new IESO Save on Energy Conservation programs. Since the wholesale market opened in 2002, the market price has been known as the Hourly Ontario Energy Price (HOEP). After May 1st, 2024, this price is now known as the Ontario Electricity Market Price, or the Ontario Price for a slightly shorter name.
Any customers that pay for their electricity through their local distribution or electricity sub-meter providers will continue to receive monthly bills as they always have, that isn’t changed. The IESO settles the renewed market within the same timeframes, working with LDCs as they purchase electricity through the wholesale market and pass on those costs to their customers.
Consumers don’t need to take any action, and bills will not be changing for residential or commercial consumers.
Why is this happening?
IESO has made these changes to make the wholesale market more efficient. The renewed market improves the way electricity is scheduled and priced in Ontario, leading to prices that more accurately reflect the cost of providing it to consumers and large industries. These improvements bring Ontario in line with most North American wholesale electricity markets and will pave the way for a more competitive future market, the integration and enablement of new technologies, and a rapidly growing electricity system.
Who’s going to benefit from this change?
The renewed market change is anticipated to achieve significant efficiency savings by increasing the transparency and competition of the market. While all consumers will benefit from the efficiency changes, the impact of the savings will be spread across the entire market over the next number of years. While it may not be noticeable immediately upfront, in the long run, it should make a difference from everyone’s standpoint in the province, whether it’s residential or large consumer businesses.
How does it impact commercial energy consumers?
This renewed market will enhance security and reliability by securing generation and other forms of supply in the previously mentioned day-ahead market. There will also be improvements in the way the IESO schedules supply in the hours leading up to the real-time operations. That all being said, this will contribute to the resilience of the overall electricity system, which in turn will keep it running smoothly and without worry for all consumers across Ontario.
For large energy consumers, this renewed market does offer new options and will have more information posted on the IESO marketplace training pages for those interested to find more. Market renewal introduces a new market participant category called a Price Responsive Load.
This new customer category can take advantage of local prices by locking in day-ahead prices, but still have the flexibility to consume energy without restrictions. This change should be beneficial to large energy consumers, such as those running industrial businesses, and anyone worried about the market changes bringing a large impact to their systems.
For industrial and commercial customers that currently pay the wholesale price through their local distribution company:
- The only change will be the process used behind the scenes to calculate market prices as more competitive. Everything else stays the same.
- The wholesale price is the same no matter where they are in the province. LDC customers will not be billed for electricity based on locational marginal pricing.
- The inverse relationship between the Global Adjustment and the wholesale price remains the same.
- LDCs will continue to prepare their bills each month, including the market price in the Wholesale, Commodity, or Energy charge on their bill.
Businesses that have a contract with a retailer will also see no change.
Is it going to affect residential consumers?
According to the province, residential customers on the regulated price plan will continue to pay Time-of-Use, Ultra-Low Overnight or Tiered Prices set by the Ontario Energy Board. Customers who pay for electricity through an electricity unit sub-meter provider will continue to pay for electricity based on their retail contract.
In other words, changes for any residential consumers will not be noticeable, if at all. These changes to the electricity market are negligible and shouldn’t be worrying to an everyday consumer who is just going through power bills at home month to month.
When it comes to provincial changes with electricity markets, federally, or otherwise, consumers can feel overwhelmed with all of the information available and what that means for their businesses. At EnergyRates.ca, our team can help with an unbiased opinion on current electricity rates across the country and can give advice on what is best for your company.
