Authored by: Jessica M. and James C. from Peak Power’s Markets Team

 

Ontario is entering a new era in energy planning. In June 2025, the province released its Energy for Generations plan, a long-term supply framework to meet growing electricity needs through investments in nuclear refurbishments, new gas and storage facilities, renewables, and transmission infrastructure. The plan reflects Ontario’s goals of ensuring reliable, affordable, and sustainable power for the future.

For Class A electricity customers, industrial and commercial consumers whose electricity costs are tied to their contribution to system-wide peak demand, these changes mark the end of a short-lived era of subsidy-driven relief. With Global Adjustment (GA) charges poised to rise sharply, Class A customers need to prepare now for a decade of higher costs.

The 2020 Class A Global Adjustment Subsidy: Temporary Relief

Ontario’s 2020 budget temporarily reduced Global Adjustment costs by shifting a portion of the cost burden from electricity users to the provincial tax base. This subsidy created short-term relief for industrial and commercial customers, reducing electricity bills for Class A and Class B customers. However, that program was always temporary. As Ontario transitions into its long-term “Energy for Generations” supply plan, Class A customers face rising GA costs again, likely to exceed pre-2021 levels in the coming decade.

Ending the Renewable Cost Shift Program

In 2021, Ontario introduced the Renewable Cost Shift, a program that temporarily moved a large portion of above-market renewable energy contract costs, normally recovered through the GA ,onto the provincial tax base. This was done in response to mounting pressure over high industrial electricity costs.

The Financial Accountability Office (FAO) summarized the subsidy’s impact:

“$7.2 billion will be provided to reduce electricity bills for industrial ratepayers. Most of these payments ($6.9 billion) will be through the Renewable Cost Shift, which will provide a 14 per cent reduction to a typical industrial ratepayer’s electricity bill in 2021–22.”
— FAO, Ontario’s Energy and Electricity Subsidy Programs, 2022, P. 3

This was a meaningful reduction, particularly for Class A customers, defined as large electricity users with peak demand generally over 1 MW (or 500 kW in select sectors). These users are billed based on their consumption during the five system-wide peak demand hours of the year, a structure known as the Industrial Conservation Initiative (ICI).

However, the FAO also cautioned:

“The discount will decline over time as the subsidized renewable energy contracts expire.”

The newly released Energy for Generations plan confirms that this temporary relief will begin phasing out in 2026. Once that happens, the full costs of legacy renewable contracts will return to electricity bills, placing the burden squarely back on Class A customers.

In other words, the 14% relief enjoyed by Class A customers from 2021 through 2025 will begin coming to an end, and unless new mitigation measures are introduced, GA charges are likely to rise significantly in the coming decade.

New Capacity Procurements Are GA‑Funded, Not Market‑Settled

As part of Ontario’s Energy for Generations plan, Ontario is moving forward with a wide pipeline of new capacity procurements—ranging from gas generation and energy storage to renewable projects and nuclear refurbishments.

Crucially, these projects are not compensated through market-set energy prices. Instead, they are paid through fixed availability contracts, with all associated costs recovered fully via the GA.

This is supported by IESO documentation on settlement processes:

• The IESO Non‑Market Settlement Manual explains that for contracted generators, “the contract payments will be recovered through the global adjustment” rather than through real-time energy market transactions.

 

Adding further clarity, the Ontario Energy Board’s 2022 State of the Market Report defines GA as the mechanism that “reconciles differences between payments made to generators at the competitive wholesale market price and payments made at regulated rates or contracts that differ from the wholesale market price.”

The cost of new contracts, like those from long-term RFPs, gas plant upgrades, and nuclear refurbishments, doesn’t flow through market electricity prices. Instead, they’re paid through the GA. As more of these contracts are signed, the GA pool will grow, increasing costs for Class A customers who are charged based on their contribution to system peaks.

Rising Peak Demand Will Drive GA Costs Higher

Ontario’s electricity system is entering a phase of sustained demand growth, driven by electrification, industrial development, and economic expansion. This growth will increase peak demand, the maximum electricity required at any moment on the grid, putting upward pressure, particularly for Class A Global Adjustment costs.

The chart below from the IESO’s 2025 Annual Planning Outlook shows projected net annual peak demand rising from about 24 GW in 2026 to 36 GW by 2050 for summer peaks (a 48% increase) and from 23 GW to 37 GW for winter peaks (a 57% increase) over 25 years.

Figure 1: Ontario’s Net Annual Peak Demand Forecast (2026–2050), Source: IESO, 2025 Annual Planning Outlook

This forecasted increase is driven by:

• Electric Vehicle (EV) Battery Plants and Charging Infrastructure: The shift to EVs, including manufacturing and charging, is a major demand driver, expected to contribute 20 TWh by 2035.
• Hyperscale Data Centers: Data centers supporting AI and cloud computing will account for 13% of new electricity demand by 2035.
• Building Electrification and Heat Pumps: Residential and commercial sectors are adopting electric heating, increasing demand.
• Economic Growth in Urban and Industrial Hubs: Areas like Toronto and Windsor are seeing industrial and population growth, boosting electricity needs.

Why This Matters for Class A Global Adjustment

To meet rising peak demand, Ontario must build and maintain:

• New Generation Capacity: This includes gas, storage, and renewables procured through long-term contracts.
• Expanded Transmission and Distribution Infrastructure: To connect new resources and support load growth.
• Refurbished or Extended Nuclear Units: To ensure reliable baseload supply.

 

As mentioned, all of these projects are funded through fixed-price contracts recovered through GA—not the market.

Under the ICI, Class A customers’ GA charges are calculated based on their electricity usage during the five highest demand hours of the year. As system peaks increase and more contract costs are added to the GA, customers who cannot accurately predict and manage usage during peak hours will see significantly higher charges.

Nuclear Refurbishment, Pickering Extension, and SMRs: GA Cost Drivers

Ontario’s electricity reliability plan hinges on a major expansion and renewal of its nuclear fleet. While critical for long-term supply, these projects come with high costs that will be recovered through GA.

For Class A customers, this means larger GA pools and higher exposure to peak-related charges, particularly during the transition to new nuclear capacity.

Figure 1: Nuclear Refurbishment and Retirement Schedule:, Source: IESO, 2025 Annual Planning Outlook

Bruce and Darlington Refurbishments

Ontario is refurbishing reactors at both Bruce Power and Darlington, with projects exceeding $12 billion at Darlington alone.

These are fixed-price, long-term contracts, meaning ratepayers pay whether or not the power is needed or used. This means costs are embedded in GA, adding billions in fixed recovery costs over the next 10–15 years.

Pickering B Life Extension

The government extended the life of Pickering B (Units 5–8) through 2026. While this is less costly than a full refurbishment, it still adds operational and maintenance costs to the GA pool.

SMRs: New Nuclear for the 2030s

Ontario plans to build four SMRs at Darlington, with the first unit expected online by 2034. These units represent a major capital investment and will also be paid through availability contracts—adding yet another layer of fixed GA costs starting in the 2030s.

Contracted Gas Capacity: Rising Fixed Costs in the GA

Ontario is increasingly relying on contracted resources to meet growing system needs. Since 2022, the IESO has procured over 1,400 MW of firm capacity through various mechanisms:

• 1,177 MW from the Expedited and Medium-Term RFPs
• 255 MW through Same Technology Upgrades (efficiency gains at existing gas facilities)
• 43 MW from the Brighton Beach natural gas upgrade

 

These resources are paid based on availability, not dispatch. That means the system pays, via long-term contracts, regardless of how often the resources run. All associated costs are recovered through the GA.

This shift away from market-settled generation is illustrated in the chart below:

Figure 1: Remaining Energy Needs and Future Procurements and Programs Required (2029–2034), 2025 Annual Planning Outlook

The growing dark blue segments show how a rising share of Ontario’s energy needs, especially by 2034, will depend on future procurements, all of which will be paid through contract structures that flow through the GA.

Market Renewal Won’t Solve Global Adjustment Pressures

In May 2025, Ontario launched the Day-Ahead Market as part of its broader Market Renewal Program. These reforms improve how electricity prices are set, increase transparency, and enhance system efficiency.

But market efficiency alone won’t lower GA costs.

Why? Because the bulk of Ontario’s electricity still comes from power plants that are paid for through long-term contracts or regulated rates. Even with a more efficient market, the structural cost burden of contracted capacity remains and will continue to grow.

In other words, while the market reforms are useful, they don’t affect the part of the system where most of the money is spent. The GA will keep going up as Ontario adds more contracted supply to meet future demand.

The Impact of “Energy for Generations” on Class A Customers

The bottom line is clear: the phase-out of subsidies, surge in contracted capacity, and sharp demand growth all point to a new era of higher GA costs for Class A customers.

As Ontario brings more capacity online through long-term contracts and continues with large infrastructure projects like nuclear refurbishments, the size of the GA cost pool is expected to grow. Because these costs are fixed and outside the energy market, they are passed on through the GA regardless of how much energy a customer uses overall.

Unless customers can accurately predict and reduce usage during peak hours, they face increasing costs in the years ahead.

Conclusion: Take Action Before the GA Curve Steepens

The Energy for Generations plan signals long-term reliability and sustainability—but with real cost consequences for large energy users. With GA costs set to climb starting in 2026, proactive planning is no longer optional—it’s essential.

At Peak Power, we help Class A customers protect their bottom line through:

• Battery energy storage systems to provide automated load curtailment and respond to grid GA events
• AI-powered peak prediction with GridPredict to to notify you of GA events with precision

 

Ready to reduce your GA exposure? Contact us today to book a discovery call.