GA and HOEP: Watt’s going on

Logo Icon

Ever since the beginning of the COVID-19 pandemic, Ontario’s electricity sector has been on an unprecedented wild ride.

The latest deviation from historical demand trends is the IESO’s recent announcement of substantially lower Global Adjustment (GA) costs. GA has dropped 59.3% to $561,163,153.88 for February 2021, compared to January 2021 ($946,932,210.70).

This substantial decline is due to demand being higher than IESO forecasts, as well as complications stemming from generators being offline. As Hydro One points out;

“You will notice that the GA total was lower than historical values primarily driven by higher electricity demand than forecasted and unanticipated generator outages leading to greater use of natural gas facilities. These events resulted in a higher ‘Hourly Ontario Energy Price’ (HOEP) which would diminish the GA charge due to the inverse relationship they have.”

It isn’t the first time that GA has plunged so suddenly, but it is the most considerable swing since 2008. If you consult the above graph, you’ll notice two large GA price events, one in 2014 and one in 2015, as highlighted by the first two buckets in the graph: the third bucket highlights the most recent GA price drop in January of this year.

If you are wondering what this means for your company, simply multiply the aforementioned GA number for February by your Peak Demand Factor (which is still frozen until May 1st, 2021), to calculate the amount you will have to pay due to this recent GA change.

Let’s take a further look at that inverse relationship between GA and HOEP. The chart above clearly shows as HOEP decrease in a limited capacity, GA rises. Given the higher demand and offline generators in February, we estimate a HOEP of $33.77/MWh which is line with the current GA rate.

The interesting question now on everyone’s minds is ‘how much did generation go down by?’ At this point, we do not know.

There is a lag between when IESO compiles and releases monthly data. The IESO posts generator information by fuel type each month, the most recently released report released on March 1st only included data until January 2021. EnPowered will stay tuned and inform you as soon as new information arrives.

Logo Icon