If you own or operate a large business that pays HOEP rates for its energy needs, then chances are that at some point, you’ve noticed a fee for “Global Adjustment” in the line item breakdown.
However, most Ontario energy consumers are unaware of the Global Adjustment, and may not know that they pay for it as part of their energy bill every month. What is the global adjustment, and why are you being charged for it?
In short, the Global Adjustment was an attempt at encouraging energy production.
Back in the early 2000s, the Ontario Government faced a difficult question: How could they encourage increased energy production (especially alternative forms of energy production), despite the threat of sudden price drops that could bankrupt these producers. In response, the government passed the Energy Restructuring Act in 2004, which provided for the Provincial Benefit (which later became the Global Adjustment).
The Global Adjustment serves to provide producers with a guaranteed price for the energy they produce. If the Hourly Ontario Energy Price (HOEP)—a spot market price that rises and falls due to changes in demand and supply—drops below the guaranteed rate, then consumers pay a fee that makes up the difference. Conversely, when the HOEP is higher than the guaranteed rate, then producers credit consumers for the difference. Because energy prices vary over time, the GA changes as well, offsetting the rises and falls of energy costs.
At the time of the Energy Restructuring Act, it was assumed that cost of energy production would remain relatively stable, so that even when the HOEP fell, the cost of the GA to consumers would be relatively minor. However, the cost of energy production, and especially the cost of green energy production, has dropped precipitously in recent years. This is due to improvements in technology, falling demand for oil and natural gas, and an increased supply of energy.
As a consequence, the HOEP is consistently lower than guaranteed rate, resulting in consumers consistently being charged for the Global Adjustment.
All Ontario energy consumers pay the Global Adjustment.
Many consumers are unaware of the existence of the Global Adjustment, because they’ve never seen it on their bills. However, this is because there are multiple ways of paying for energy services. Generally speaking, people pay one of three energy rates in Ontario:
- Hourly Ontario Energy Rate (HOEP)
- Time-Of-Use (TOU)
- Regulated Price Plan (RPP)
The cost of the Global Adjustment is built into TOU and RPP rates—which is what the vast majority of homeowners and small business owners pay—which means that you never see any mention of the Global Adjustment in your bill. On the other hand, HOEP rates—which is what large consumers are charged for—does not build additional charges into the overall rate, so instead GA and other fees are added to their bills as separate charges.
