Saturday, September 11, 2010

Global adjustment: a political time bomb in Ontario

http://www.lexology.com/library/detail.aspx?g=c928396d-91c8-4b60-a828-6d05ecc80eae











Canada November 25 2009





Prior to April, 2009, most Ontario electricity consumers probably paid little attention to the "Provincial Benefit" line item on their electricitybills. They had little reason to. Since its inception in 2005, the Provincial Benefit, known in Ontario's electricity industry as the GlobalAdjustment, was a relatively small adjustment on their electricity bills.


A drastic drop in market prices for electricity and increased governmental payment obligations have made this overlooked price adjustment a powder kegof political resentment and consumer backlash. In April 2009, for the first time ever, the Global Adjustment charged to Ontario electricity consumersexceeded the market price of the electricity they purchased. In every month since then the Global Adjustment has been significantly greater than themarket price for electricity purchased by these consumers


The Global Adjustment is the difference between the rates paid by Ontario governmental authorities to regulated and contracted electricity generatorsand the spot market prices for electricity consumed in Ontario. If the amount paid by Ontario governmental authorities for the generation of theelectricity is higher than the market price for the electricity, a positive Global Adjustment is charged to Ontario electricity consumers. If theamount paid by Ontario governmental authorities for the generation of the electricity is lower than the market price for such electricity, a negativeGlobal Adjustment is credited to Ontario electricity consumers.


The amounts paid by Ontario governmental authorities that are factored into the Global Adjustment fall into three categories: (1) amounts payable fornuclear and baseload hydroelectric generation by Ontario Power Generation Inc. (OPG), (2) amounts paid for non-utility generation administered by theOntario Electricity Financial Corporation (OEFC), and (3) amounts paid under agreements between the Ontario Power Authority (OPA) and electricitygenerators and suppliers of conservation services. Each of these three categories of governmental payment is explained in more detail below.


In the case of OPG's regulated hydroelectric and nuclear generators, a fixed price for electricity is set by the OEB. If the net revenue earned fromthe sale of electricity produced by these regulated baseload generators is less than the regulated price, the difference is charged to electricityconsumers as part of the Global Adjustment. If the net revenue from OPG's sale of this electricity is more than the OEB's fixed price, the excess iscredited to consumers.


Non-utility generators (NUGs) are generators that are not owned by the former Ontario Hydro. These generators provide electricity at set prices underpower purchase agreements with what is now the OEFC. As is the case with the OPG base-load regulated generators, the difference between the OEFC's netrevenue from the sale of this electricity and the amount that it pays to the NUGs under power purchase agreements is charged to electricity consumersas a component of the Global Adjustment.


The final component of the Global Adjustment arises under OPA contracts for generation and demand management projects. Some of these projects were setup through the OPA's former "Request for Proposals" process while other projects resulted in power purchase contracts without recourse to the RFPprocess. The OPA provides guaranteed revenue to electricity suppliers under these agreements. If the project earns net revenue that is less than theguaranteed amount, the difference is made up from a charge to the Ontario consumer through the Global Adjustment.


April 2009 saw an unprecedented change in the Global Adjustment. Until then the Global Adjustment had never exceeded 1.44 cents per kWh, and in thevast majority of months it had been less than 1 cent per kWh. In April, 2009 the Global Adjustment shot up to 3.020 cents per kWh and has remainedabove 3 cents per kWh each month since, except for June 2009 when it dipped to the still relatively high amount of 2.79 cents per kWh.


By covering the gap between the market price for electricity consumed in Ontario and the amount Ontario governmental authorities contract to pay out inthe categories outlined above, the Global Adjustment reduces the volatility of electricity prices and passes the cost of new generation projects on toconsumers. This procedure enables the Ontario government to offer price certainty to new generation and demand management projects, spurring thedevelopment of new electricity supply projects in Ontario.


However, consumer resentment may be growing now that reduced economic activity, particularly in Ontario's flagging manufacturing sector, hascontributed to a steep decline in spot market electricity prices. The Global Adjustment has prevented the benefits of low electricity market pricesfrom being passed on to the Ontario consumers, many of whom badly need it, particularly in light of the rising Canadian dollar.


Hardest hit are consumers who signed retail contracts at locked-in prices before the electricity market price crashed. Retail contracts provide theconsumer a fixed price for electricity, subject to the floating Global Adjustment. Consumers that locked into fixed rates under retail contracts beforethe market prices crashed have experienced a double whammy - locked-in fixed rates that exceed the current market price, plus a drastically increasedGlobal Adjustment.


The guaranteed rates being offered by the OPA under its new Feed-In-Tariff program will put continued upward pressure on the Global Adjustment, byproducing a source of new governmentally-guaranteed pricing for electricity generation.


As a result, it appears Ontario electricity consumers are not going to experience relief from high electricity bills in the foreseeable future.







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RW: The Global Adjustment is extra the producers of power get paid by you when demand is low and the spot price is down. Which is the case with this recession. The producers get paid for lost revenue due to lower demand. They get paid to not produce power.

Let me see if I have this right.

Every weekend you travel half a day with the kids to visit grandma. Before you head out you always fill the tank at the local station. But because you have been laid off, or are suffering increases in other costs, you decide to only go every other weekend.

But that poor gas station owner just lost half the money he normally gets from you. So to compensate him for that loss, the government forces you to pay him double on each visit for the gas to fill your tank, in lieu of the gas you would have used in the weekends you missed.

Get the picture now?

This is how the Provincial Benefit (Global Adjustment) has changed:





Data from: http://www.ieso.ca/imoweb/b100/b100_GA.asp

DO NOT SIGN UP WITH RETAILERS!
You will pay about twice for power if you do as it stands now.

48 comments:

  1. DO NOT SIGN UP WITH RETAILERS!

    ReplyDelete
  2. Direct Energy are RIP OFF ARTIST DO NOT I REPEAT DO NOT sign with them or any other retailer I'm paying 12.82KWH where as I'd be paying at most thismonth with Toronto Hydro 7.9 avoid being ripped off

    ReplyDelete
    Replies
    1. I work for a retailer and the only reason anyone doesnt like these programs are if they're misinformed or signed before the market crash. The annual average of the global adjustment last year was around 3.5 so even if you signed last year at 8.49 (my rates are much lower) that's 12 cents with the ga so with the 46% increase that puts the off peak at around 11 mid peak at 15 and on peak at around 18 . With the option to blend & extend after 1 year (blend your rate with market rate and extend for 3 years) that pouts the customer paying on peak pieces on averagel at first (11.7 so pretty close) however as The utility price rises and yours does not this is how you benefit so at the end of 5 years you are paying off peak with the increases the government announced and voila you blend and extended your contract already not only do u get 3 more years but your rate dropped up to 15%. There is no limit to the amount of times you can blend and extend

      Delete
    2. I work for a retailer and the only reason anyone doesnt like these programs are if they're misinformed or signed before the market crash. The annual average of the global adjustment last year was around 3.5 so even if you signed last year at 8.49 (my rates are much lower) that's 12 cents with the ga so with the 46% increase that puts the off peak at around 11 mid peak at 15 and on peak at around 18 . With the option to blend & extend after 1 year (blend your rate with market rate and extend for 3 years) that pouts the customer paying on peak pieces on averagel at first (11.7 so pretty close) however as The utility price rises and yours does not this is how you benefit so at the end of 5 years you are paying off peak with the increases the government announced and voila you blend and extended your contract already not only do u get 3 more years but your rate dropped up to 15%. There is no limit to the amount of times you can blend and extend

      Delete
  3. ALL of the retailers are rip-off artists (same as the government) and the OEB is of no help to consumers. Planet Energy is as bad as Direct Energy.

    ReplyDelete
    Replies
    1. Then become an ACN PLANET ENERGY customer at least you are helping 7 people feed their families on the bill you pay....

      Delete
    2. And if you become a rep 10% of Your bill comes back to you in your cheque....

      Delete
  4. I am with a retail company called Just Energy and I am on the Rate Flex (market price) program and I am actually paying less than with Just Energy than I would be if I stayed with my utility company. So until you have all the facts about every company don't asume they are all the same.

    ReplyDelete
  5. Would have been nice if Just Energy disclosed this billing surprise when I signed up. Now I'm left fuming.

    ReplyDelete
  6. I am paying at least 18KWH with just energy they are scam artists on no account sign up with ANY retailers they are out to rip you off. My global adjustments are crippling.

    ReplyDelete
    Replies
    1. With ACN PLANET ENERGY the global adjustment is always less than the market price is at 4.9/kwh at the moment...

      Delete
    2. dearest Giovanna,I just opened hydro bill and was welcomed to a Global Adjustment of 9.0094cent. Your ACN planet must be different than mine ?

      Delete
  7. Caveat Emptor. Let the buyer beware!

    If it looks too good to be true then it probably is.

    ReplyDelete
  8. Again, please check all the facts. Call up your retailer (just, direct etc) and ask for your lowered rate. They will lower it for you if you are on a rate higher than whats being offered. The floating rate for just is great but be ware of changes in the market, they could shoot up. A fixed rate is safest, but you mat pay more for peace of mind. The retailers are not scams, they didnt expect rates to dro so much, and when they go up again near the end of your term is when you will save the most money

    ReplyDelete
    Replies
    1. Are you on a contract?...will you consider being a PLANET ENERGY customer through ACN?...your bill will help 7 people support their family....and if you become a rep up to 10% of your usage comes back to you,in your cheque...

      Delete
  9. Just Energy is the best and safest way to attaing the cheapest energy. The OEB regulates the Global Adjustment fee not Just Energy!! Market Share plus 1 cent is by far cheaper than any other retailer with no fee's of any kind through Momentis by Just Energy. Momentis offers no fee's to get in or out unless you sign in for a long term contract, and even then it's only $100 to get out. But why when you're saving money? Try to start educating your selves people on these things, its worth it. I'm paying 11 cents per cubic meter for gas as well which is way cheaper than any other utility company right now!! Go Momentis GO!!

    ReplyDelete
  10. Momentis also offers no time of day use!! Its the best solution to the utility problems happening right now!!

    ReplyDelete
  11. Im with a retailer and I pay way less than most of my neighbours. As the government promises to increase rate til 2014, I will be paying less than 6c/kWh...Im feeling pretty good about my retailer about now...

    ReplyDelete
  12. I'm with Direct Energy and paying 5.7 per kwh. My global adjustment is 3.945 per kwh. My bill for $ 31.23 for electricity used, becomes $ 112.35, thanks to McGinty and his Liberals. I can't understand how so many Ontario residents could vote for him in the last election.

    ReplyDelete
    Replies
    1. When your contract expires please consider becoming an ACN PLANET ENERGY CUSTOMER. They help 7 people support their families from your usage part of the bill...if you become,a rep up to 10% is payed back to you in a cheque

      Delete
  13. In a small business global adjustment works out at 2,314.19 this month. Thats about a 100% increase from previous months. What a win for the provincial government? In business we could not rip off our customers like that, and get away with it!

    ReplyDelete
    Replies
    1. Are you on a contract?...will you consider being a PLANET ENERGY customer through ACN?...your bill will help 7 people support their family....and if you become a rep up to 10% of your usage comes back to you,in your cheque...being a rep is not door to door selling...it just means you get paid on your own utilities and services

      Delete
  14. just enery is a rip off i have there contracts and there stupidly high rate frozen at 9.2.plus.the g.b.a u.do.the.math direct energy and just enery scams other retailers are reliable if u want just energy contarct images let me knw rip off

    ReplyDelete
  15. summitt is a huge rip-oof also. unethical,etc. it is amazing these clowns are still in busines

    ReplyDelete
  16. Thank god my contract is up this year. F U SUMMIT..

    ReplyDelete
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  24. I have been looking for help for a year now. My kids hydro bill is crazy. When we asked what global adjusment was they explained it perfectly. The problem is, it was a tenant who signed the contract. The hydro wasn't even in her name. My kids are being firced to stick with this contract and they don't know who it's with or how long the contract is good for. It seams hydro only wants their money and they don't care about their costomers problems. REALY how can someone sign a contract with someone and a big busness like hydro one can make you stck to a contract that you yourself didn't sign.

    ReplyDelete
    Replies
    1. you can get out of the contract with $100 per year of the remaining contract period and that too can be compensated.

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  37. I can calculate the rate per KWH of my glocal adjustment (currently approx. 7 cents). The adjustment according to my power bill is factored into everyones' bill that purchases power. How can I find out what the rate is on those bills?

    ReplyDelete
  38. Fast forward to October 2017. I analyzed my bills for the past 12 months. I went into my utility and exported the time of use data for each bill cycle. I then calculated my cost based on the utility's rate for that month.

    From October 2017 going back 12 months I calculated what my utility would have charged me vs what the bill was with Planet Energy as my retailer.

    To my shock for the past 12 months I overpaid on my electricity by $1104.62. To me that is a lot of money.

    I suggest you save your money and avoid the retailers. When you talk to the Planet Energy reps they talk about a fix rate for electricity and they say that they only charged the fixed rate. They say they don't charge the Global Adjustment. This is all true. However you do get charged a global adjustment fee plus the PE rate and when you combine the two it's more than what you would pay for power if you had not used the retailer.

    Stay away from retailers and do not believe the nonsense they say. If you do join please do the math and calculate for yourself to see if it is worth your while or not. Don't believe a word they say.

    They make their money off the backs off of idiots like myself. If you feel generous and want to support the PE reps and their families please join and pay the extra money and consider it a good will contribution.

    ReplyDelete

Please feel free to leave a comment, especially if you wish to share your own horror story. If you wish to get involved in the class action suit please contact me directly at jrwakefield@mcswiz.com put Class Action Suit in the subject please.