LAS Electricity Program Pricing Details for 2019

Posted: November 07, 2018


LAS recently completed a tendered purchase for the 2019 Electricity Program hedge that includes 133 enrolled municipalities.  The term of the purchase is from January 1 to December 31, 2019, which coincides with the conclusion of the 2018 program year.
 
Effective January 1, 2019, the LAS program hedge cost will be $24.00/MW (2.4¢/kWh), including fees.  See the chart below for the expected total commodity calculation.
 
Spot Market Consumption:

It is impossible to predict the spot market cost of electricity as it is dependent on the supply and demand of electricity on an hour-by-hour basis.  However, over the past 12-months the weighted average spot market price was 2.240 ¢/kWh.
 
Global Adjustment:

The average Global Adjustment charge over the past 12-months was 9.694 ¢/kWh.  LAS has added 5% to this charge as a precaution for 2019 budgeting.
 
Global Adjustment Modifier:

July 1, 2017 saw the introduction of another factor in determining the total commodity costs – the Global Adjustment Modifier.  Under the Ontario Fair Hydro Plan, the Ontario Energy Board sets an amount that electricity distributors and others will apply to reduce the GA payable by eligible customers on electricity consumed between May 1, 2018 and April 30, 2019*. The GA Modifier is set at -4.44 ¢/kWh. As it is unknown what will happen to the GA modifier following April 30, 2019, LAS has split rate expectations into two parts – an expectation up until April 30, 2019 that includes the GA Modifier, and one from May 1 – December 31, 2019 that excludes the GA Modifier.

*Please note that the GA Modifier is only applicable to RPP eligible accounts, including streetlight accounts, consuming less than 250,000 kWh annually.  Your municipality may also have non-RPP eligible accounts enrolled in the program, in which case the GA Modifier will not be applicable.

The following chart illustrates the expected average total commodity cost in 2019 based on the 2019 LAS hedge price at 65% and similar market pricing over the last 12-months.
 
Expected Commodity Costs @ 65% Hedged:

Chart.png
 
Notes:
  • Average weighted HOEP price from November 2017 to October 2018. Past averages may not be indicative of future costs.
  • Average Global Adjustment charge from December 2017 to November 2018 (plus 5% for caution)
  • Based on November 2018 rates and assuming a usage pattern of 55% off-peak, 22.5% mid-peak, and 22.5% on-peak (representative of a typical municipal account) the TOU rate is 8.66 ¢/kWh.
There will be points during the term when the spot market cost is lower than the LAS hedge price.  However, there will also be points during the term where the opposite is true, where the spot market price is higher than the LAS Hedge price.  The hedge portion is intended to safeguard against large swings in the spot market during peak heating and cooling seasons, whereas the exposure to the spot market can lower your commodity cost during low-market rate periods.
 
Streetlight Accounts:

All enrolled streetlight accounts will continue to bill at the prevailing spot market rates in 2019.  As mentioned above, the Global Adjustment Modifier will be applicable to streetlight accounts as well, so long as they are RPP eligible and fall under the 250,000 kWh threshold.
 
Electricity costs are typically lower for streetlight accounts because streetlights are primarily operated when demand for electricity is lowest (i.e. overnight – from dusk to dawn), and with lower demand comes lower spot market rates.  Over the most recent 12 months, the average streetlight commodity price was 1.659 ¢/kWh
 
Expected Streetlight Costs:

Chart2.png
 
Notes:
  • Average spot market cost based on streetlight profile of an Ontario LDC - October 2017 to September 2018. Costs within different LDC service areas may vary slightly.
  • Average Global Adjustment charge from December 2017 to November 2018 (plus 5% for caution)
  • Rate is the higher of the two-tier RPP rates as many municipal streetlight accounts get charged the majority of usage at the upper tier.
 
Current Time-of-Use (TOU) and RPP Rates:

Effective November 1, 2018, Time of Use (TOU) electricity rates remained static, as follows:
  • On-Peak           13.2 ¢/kWh       (7-11am and 5-7pm M-F)
  • Mid-Peak          9.4 ¢/kWh         (11am-5pm M-F)
  • Off-Peak           6.5 ¢/kWh         (7pm-7am M-F, plus weekends and holidays)
 
The RPP rates for ‘eligible’ municipal accounts, effective November 1, 2018 are:
  • Up to 750 kWh – 7.7 ¢/kWh
  • All Additional Usage – 8.9 ¢/kWh
 
The RPP ended in 2009 for municipal accounts with annual consumption of >250,000kWh; accounts that exceed this threshold, and which are not enrolled with a retailer (such as LAS) are billed at the weighted average spot market rate.
      
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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