Small businesses could pay significantly more for a portion of their April hydro costs, the consequence of reduced energy consumption throughout the province.
With millions of people working from home energy consumption patterns have shifted, and Ontarians are using about 12.2 per cent less power compared to two years ago, according to the Independent Electricity System Operator.
While this is ostensibly a positive policy outcome, Ontario's electricity system has substantial fixed costs through contracts meant to ensure stable ongoing supply, and this system did not anticipate a dive in demand related to a pandemic.
Into the void will step the global adjustment, which in part covers the difference between the guaranteed price and what generators can earn on the wholesale market. Residential ratepayers, who are currently paying the lowest amount on the time-of-use scale for all hours of the day, are protected from the global adjustment increase at this time, as are farms and some small businesses.
But Class B ratepayers, which includes some other small businesses and manufacturers, are not protected. With fewer ratepayers paying the freight, these ratepayers will have to pay a larger proportion to make up the difference.
That comes as small businesses have been ravaged by the pandemic, with many that are unable to operate online having suspended operations altogether. For manufacturers, it comes as the government has called on them to shift production to focus on medical supplies and other necessities.
The energy policy implications drew a strong rebuke from the Ontario Chamber of Commerce, the largest representative of businesses in the province. "The OCC is deeply concerned about the impact the COVID-19 crisis is having on small business’ electricity bills," President Rocco Rossi said in a statement to QP Briefing. "With Ontario’s fixed cost base being shifted onto fewer Class B ratepayers, many more businesses may be forced to close their doors," he warned.
"Temporarily offsetting electricity rates for Class B ratepayers will help essential small businesses keep their lights on. We are working closely with our members and government to help businesses get through this difficult time."
Terry Young, a vice-president for the IESO, says that the scope of the global adjustment increase will be reflected in May bills, when April costs come due, and he explained that the per-unit cost of the global adjustment will be higher.
The government is aware of the issue and is reviewing all policy options, said Sydney Stonier, a spokesperson for Energy Minister Greg Rickford.
"We also know that small businesses, whether they are open or closed, continue to have electricity costs and need help during this difficult time," adding that the government is working closely with the Ontario Energy Board and utilities to find an approach that reflects the huge change in consumption patterns.
"The COVID-19 pandemic has created economic uncertainty for businesses across the province. As we continue to combat the COVID-19, we continue to monitor the impacts and evaluate available options to reduce costs and stabilize electricity bills for Ontario’s industrial electricity consumers," she added.
The opposition said that a policy intervention is necessary given the turmoil small businesses and manufacturers face.
"There's no doubt in anyone's mind that we need to protect manufacturers and small businesses," said Peter Tabuns, the energy critic for the NDP. He argued that "jobs are on the line" and that there has to be a "willingness to provide some sort of relief."
But he also argued that the issue highlights larger problems in containing electricity costs, although he acknowledged that's a larger issue for another day.
Green Leader Mike Schreiner also said some sort of relief should be in the cards. "I think the government is going to have to look at that as part of a relief package for small businesses." He added that his immediate attention is focused on the ability of small businesses to pay the next month's rent, and that utility bills come after that concern.