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GA Cost Pools: Does it Make Sense to Opt-in as a Class A Customer?

As the GA cost pool is decreasing year over year, the decision to either opt-in to Class A or Class B needs to be more thought out. Decreasing GA cost pool means that the amount of potential savings is also reduced, so only customers who can hit all 5 peaks and curtail cheaply will reap the full benefit of being Class A.

Back in 2018, deciding to opt-in as a Class A consumer was simple. If your total energy consumption during the top 5 peaks was NOT much higher than your regular consumption, being charged energy costs as a Class A consumer would be the better way to go.

Global adjustment costs for Class A consumers are calculated based on the consumer’s contribution to the top 5 peak hours of highest energy demand in Ontario. Thus, the percent of the total energy usage that the company makes up equals to the percent of the Global Adjustment (GA) costs the company incurs. The remainder of the GA cost pool is then divided among Class B consumers.

Consumers who have an average monthly peak demand exceeding 5 MW are automatically included in the Class A category unless they opt out. Consumers with between 1-5 MW of energy demand can choose to opt-in. In 2017, the ICI threshold was reduced from 1 MW to 500 kW to allow select industrial and manufacturing sectors to also be able to opt in.

As previously mentioned, choosing to opt in as a Class A customer used to be an easy decision. Starting in 2015, the Global Adjustment cost pool started increasing at a rapid pace. An increasing GA cost pool meant that the potential savings as a Class A customer were also increasing. An increasing number of consumers opted in as Class A because even with a small amount of curtailment, Class A consumers would receive very large Global Adjustment savings.

Figure 1: GA was steadily increasing every year from 2015 onwards
Figure 2: GA costs were increasing starting 2015 and are decreasing now

However, in recent years, this trend has reversed. Now, as the GA cost pool is decreasing year over year, the decision to either opt-in to Class A or Class B needs to be more thought out. The decreasing GA cost pool means that the amount of potential savings is also reduced, so only customers who can hit all 5 peaks and curtail effectively will reap the full benefit of being Class A. In fact, choosing to be a Class A consumer might actually lead to higher costs than if the company was paying for its actual usage as a Class B consumer.

Let’s walk through an example. In 2019, with a GA cost pool of $12.98 billion and a Class B Rate of $109.3/MWh, a terrible performer (one who has very high peak demand and is unable to curtail), would have to pay huge energy costs as Class A. Comparatively, a moderate performer who is able to hit most peaks and curtail effectively would be paying much less in Class A compared to Class B, saving immensely on energy costs.

Figure 3: Hourly energy consumption of a terrible and moderate performer in 2019

Figure 4: Class B vs Class A costs in 2019

In 2021, when the GA cost pool decreased to $10.19 billion  and the Class B Rate decreased to $73.5/MWh, a terrible performer would still be paying more in energy costs as Class A. On the other hand, for a mediocre performer  who has stable energy demands and is able to curtail (see Figure 5), the value of peak management actually decreases even though the costs as a Class A consumer is lower than as Class B, the savings from choosing to opt in as Class A is significantly lower than it was in 2019.

Figure 5: Hourly energy consumption of a terrible and moderate performer in 2021
Figure 6: Class B vs Class A costs in 2021

Now, to decide whether to classify as a Class A or Class B consumer, consumers need to consider the cost of performing each curtailment and whether the number of curtailments is worth it.

For example, if it costs a company $20,000 per curtailment event, and as a Class A client they can save $710,000 by curtailing during the peaks, it is worth it to curtail as much as possible to hit the top 5 peaks. As evident by the table below, the net savings from curtailing is high even after multiple curtailments, making it worthwhile to classify as a Class A consumer given these costs and savings.

Figure 7: Net Savings with $20,000 curtailment events

On the other hand, at a facility where it costs $60,000 per curtailment, anything over 11 curtailments will not lead to net savings. In this case, the company must put more thought into the decision, as it may not be worth it to curtail as a Class A customer if hitting all the top 5 peaks is difficult.

Figure 8: Net Savings with $60,000 curtailment events

To summarize, because of the reduction of the GA cost pool, it is more important than ever to optimize how you curtail, reduce unnecessary curtailments, and understand the data behind why you are participating in Class A. With the decreasing cost pool, only customers with a low cost of curtailment should choose to opt in as a Class A customer.

While accurately predicting the top 5 peaks is not as straightforward, Edgecom Energy is here to help customers make these decisions. Edgecom Energy’s pTrack™ platform uses machine learning and AI to precisely predict the Top 5 peaks, alerting clients ahead of time when to curtail. The software minimizes the number of curtailment events required to hit all 5 peaks, making it easier for companies to realize the benefits of being a Class A consumer. For more information, visit our previous blog post on pTrack™, or schedule a demo with one of our experts.

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