By: Ka-Ming Lin

Part 1 of this blog was posted back in February.  It talked about what the Industrial Conservation Initiative (ICI) is, why it is so important, and what it’s near term future looked like.  Of special note was the fact that the Industrial Rate Review was pending.  The consultation period for the Industrial Rate Review ran from April 1 to July 16 and a report summarizing the comments received has been released.

The ICI program allows some customers to control their Global Adjustment (GA) charges which can result in very substantial reductions to their electricity costs.  As both GA charges and ICI eligibility has increased, the ICI program has taken on a bigger role in Ontario’s electricity landscape.  As a result, it is becoming more important for anyone interested in the cost of electricity in Ontario to follow developments which could impact the ICI program.

What the Government heard

While the consultation report was for the Industrial Rate Review overall, the summary report focused overwhelmingly on the ICI.  Of the six categories of comments received, two are directly about the ICI specifically, and three specifically mention the ICI in their summaries.  The ICI focus of the comments speaks to both the size of the ICI impacts on stakeholders, as well as the nature of the ICI, which puts control and agency in the hands of the customers.  This results in the government hearing about how the ICI impacts participants in terms of, not only electricity costs, but impacts to their overall operations.  Additionally, the government also heard about how the ICI program was impacting non-participants.

In Support of the ICI

The government heard that the ICI program was critical to the success and competitiveness of participants as well as providing tangible peak shaving benefit to the grid.  Some stakeholders stated that the viability of their businesses were dependent on the program and other stakeholders noted that they had made investment decisions based on the program and warned that changing the program would have negative consequences.

ICI Criticisms

The ICI program requires facilities to adjust their electricity usage in ways that are not related to their business.  Some businesses did not appreciate having to shift focus away from their lines of business in order to manage their electrical loads.  Some businesses experienced lost production as a result of ICI incentives.  Some ICI participants noted that the increase in ICI eligibility has made actual participation in the program more difficult by widening the peaks that need to be shaved.  This uncertainty has added a new level of risk to operations as missing even a single peak can have substantial financial consequences.  Additionally it was noted that the program represents a subsidization of ICI participants by non-participants and that this created a competitive disadvantage to smaller businesses.

Living with Uncertainty

The ICI program adds a great deal of uncertainty to operations. Here’s just a sample of the questions that facility managers need to ask themselves:

·         When do I need to start reducing my load, and when will it be safe to return to normal?

·         Will I be able to hit all 5 peaks?

·         Will the GA still remain such a large portion of electricity costs in the future?

·         How long will the ICI program be around?

This uncertainty results in facilities being unable to predict their future energy costs, which has serious impacts on the ability of businesses to plan their operations.  The government has been given this message quite clearly, and while there is support for the program’s continuation, even participants that were generally satisfied with the program had criticism.

This summary report doesn’t say where the government will go with industrial electricity rates, but it does collect the concerns and issues that stakeholders have raised.  The ICI program is clearly an important program and any changes made to it will have to be executed with care and consideration for the businesses that will be heavily impacted.  However, it does appear that changes are coming, as even supporters of the program recognize that it has flaws.

The approach to living with uncertainty is knowledge and planning.  It’s important to understand what the conditions are, how they might change, and what that actually means to your bottom line. Only then can we figure out what can be done, not only to mitigate negative impacts but also to get in position to take advantage of new opportunities.  As the electricity landscape continues to evolve, ORTECH will keep watch on developments with this approach in mind.