Ontario chems to save millions on electricity tariff change

19 August 2010 18:16  [Source: ICIS news]

TORONTO (ICIS)--Ontario’s chemical producers stand to save millions of dollars every year due to an important change in the formula for electricity pricing in Canada’s largest province, a trade group said on Thursday.

For the province's combined refining-chemical sector, the annual savings could come to an estimated Canadian dollar (C$) 17m/year ($16.5m)/year, David Podruzny, vice president for economics at the Chemistry Industry Association of Canada (CIAC), told ICIS.

“This is a very significant reduction,” he said.

The change affects the calculation of Ontario’s “global adjustment” charge – a levy producers and consumers of electricity have to pay, on top of the hourly power charge, to cover government programmes for renewables and investment in additional transmission capacity for renewables.

The global adjustment levy had soared in recent times, Podruzny said. Depending on the month, it sometimes doubled producers’ monthly electricity bills, he said.

Under the new formula, due to come into effect on 1 January, the levy would be based on a customer's consumption during the five peak-demand days of the year, rather than the total volume of electricity used.

The change was designed to encourage companies to reduce their electricity demand during peak times, Podruzny said.

With the change, electricity prices would rise when demand was high and fall when demand was low, he said.

Producers or consumers that raised their demand in peak time would pay more.

While Ontario’s chemical plants mostly ran 24/7, they did not increase demand in peak times and as such would benefit, he said.

Producers running on a batch or shift basis could reduce electricity demand in peak times, which would translate to an even lower global adjustment levy for them.

The change provided businesses with an incentive to manage their electricity use more responsibly, particularly on hot, smoggy days that placed the biggest strain on Ontario's grid, Podruzny said.

It would result in more controllable electricity costs for Ontario’s manufacturers, giving a much-needed boost to their global competitiveness and helping to attract new investments and jobs to the province, he said.

Ottawa-based CIAC had previously criticised Ontario’s electricity pricing, saying it hampered chemical producers’ competitiveness.

High electricity costs were cited in a number of permanent plant shutdowns in Ontario’s chemical industry in recent years.

Earlier, the trade group also lauded an important tax reform in Ontario that established a new value-added tax system in the province, comparable with those in the EU and most industrialised countries.

Major chemical firms with production in Ontario include NOVA Chemicals, Dow Chemical, DuPont Canada, LANXESS, Invista and ExxonMobil’s Canadian Imperial Oil affiliate.

In related news, Germany’s chemical industry is fighting that country’s government over a move to reduce industry tax breaks on energy consumption.

($1 = C$1.03)

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By: Stefan Baumgarten
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