Authored by: Jessica M. and James C. from Peak Power’s Markets Team
Ontario’s electricity market is gearing up for a big shift on May 1, 2025, with the implementation of the Market Renewal Program (MRP) changes to the Independent Electricity System Operator (IESO)’s energy market. Through the MRP, the IESO aims to provide greater transparency, competition, and market efficiency. The market is moving from a two-schedule market to a single schedule market (SSM) with the goal of aligning price and dispatch signals and revealing areas that require investment to further support system reliability and ultimately lead to a robust and efficient energy market while aligning with other major ISOs in North American.
This shift will impact how dispatchable load and non-dispatchable load (NDL) customers pay for their energy consumption. Below is an overview of the MRP changes that customers will see on their bills.
Understanding Market Renewal Program: Key Changes and Benefits
Dispatchable loads will see the replacement of real-time, uniform, unconstrained pricing with Locational Marginal Pricing (LMP). The LMP will include:
- Referencing pricing—the price of energy at a specific location on the grid based on available supply, known as the ‘reference bus’;
- Congestion pricing—the cost of servicing incremental demand in relation to the reference bus (i.e. if energy flows from one location towards the reference bus, congestion pricing will be negative. If the opposite occurs, it will be positive)
- Loss pricing—the cost incurred as a result of system losses associated with servicing incremental demand at the applicable reference bus. Loss factors are a function of a resource’s distance from the reference bus and the transmission system flows. Loss pricing will be established on an hourly basis for inclusion in the LMP. The greater the system losses, the lower the LMP.
NDLs can expect to see Hourly Ontario Energy Price (HOEP) replaced with Day-Ahead Ontario Zonal Price (DA-OZP). The DA-OZP will be calculated as the average of all day-ahead LMPs across the applicable load zone, of which there will now be four:
- Northwest—includes the remaining territories northwest of the Northeast and Southern regions
- Northeast—includes approximately the regions that fall south of Attawapiskat and Wawa and north of the two Southern regions
- Southeast—includes the Essa, Ottawa, Toronto and East regions
- Southwest—includes the Bruce, Niagara, Southwest and West regions
An NDL will be billed based on their forecasted hourly energy consumption at the applicable DA-OZP rate plus or minus any deviation in their actual consumption at the applicable real-time LMP rate:
[DA-OZP ($/MWh) x Net Forecasted Load (MWh)] + [RT-LMP ($/MWh) x Net Real-Time Load Deviation (MWh)]
What This Means for Class A Customers—and How Peak Power Can Help
While we recognize that these changes introduce uncertainty for customers as they try to understand how their energy costs will shift under the new Marketing Renewal Program (MRP) system, the good news is that Peak Power can help mitigate some of that price concern by helping customers regulate their energy consumption and continuing to provide other cost mitigation services, like Global Adjustment (GA) charge management.
An energy storage system can help manage energy charges by dispatching when consumption is forecasted to supersede historical forecasted hourly loads to decrease the likelihood that customers will be billed at a higher rate in the real-time market. This is known as non-coincident peak (NCP) management and can be beneficial for customers with volatile load profiles. This allows our customers to operate with increased energy cost predictability and can be further optimized to capitalize on pricing differences through different operational strategies.
One thing that will remain the same under the MRP is the GA charge is here to stay. As regional constraints under the new pricing reform become more transparent, there is potential that this will spur energy development and increase GA charges in years to come. New generation capacity can mean greater cost recovery and, ultimately, higher GA charges.
Peak Power remains well-positioned to help customers mitigate that charge, as we always have. With our peak forecasting capabilities, Peak Power helps Class A customers manage their Peak Demand Factor (PDF) and decrease their GA charges for the subsequent year.
Stay Ahead with Peak Power
The IESO’s MRP will introduce new complexities to our energy charges but Peak Power can help turn it into your advantage. With a proven GA management track record, software, and battery storage, you’re ready for May 1, 2025, and beyond.
Ready to optimize your energy strategy? Contact us today for a tailored consultation.
