Understanding Rate Classes, Charges, and Where Your Money Goes
Ontario commercial electricity bills can be complex. Between energy charges, demand charges, Global Adjustment, delivery fees, and regulatory costs, it’s not always clear what you’re actually paying for. The different classes are generally based on the business’s peak demand, which is the highest amount of electricity the company uses at one time.
This guide breaks down the key sections of a typical Ontario commercial power bill and explains the most common rate classes and charges — so businesses can better understand and manage their electricity costs.
1. Understanding Your Rate Class
Your rate class determines how you are billed. It is based primarily on your building’s peak demand (measured in kilowatts, kW).
Common Ontario Commercial Rate Classes
General Service < 50 kW (General Service Peak Demand under 50 kW)
- Small businesses (retail shops, small offices, restaurants)
- Typically billed on:
- Time-of-Use (TOU) rates, Tiered pricing (if under RPP) or Ultra Low Overnight (ULO) rate
- Energy consumption (kWh)
- Basic delivery charges
- May not have large demand charges
General Service Under 50 KW Bill Example:
Smaller businesses will have most of their bill calculated based on their usage and energy plan, choosing between tiered, time of use or ultra overnight rates. Below are examples of bills using tiered and time of use rates.
Although the delivery charge includes fixed costs, it’s also impacted by usage. Businesses need to focus on lowering overall energy consumption or avoiding peak hour consumption to lower overall bills.
Tiered Rate Bill:
Time of Use Bill:
GS > 50 kW (General Service demand peak over 50 kW)
- Mid-sized commercial buildings, larger restaurants, small industrial
- Billed on:
- Energy (kWh)
- Demand (kW) (Peak demand charge)
- Global Adjustment (Calculated based on monthly usage)
- Delivery and regulatory charges
General Service over 50 kW Power Example:
Businesses over 50 kW peak demand will have portions of their bill impacted by their peak demand, which is the highest amount of energy used at one time during the billing cycle. For instance, this business’s peak demand charge is 131,040 kW, which goes into calculating transmission network and connection charges.
Other fees such as global Adjustment charges are calculated based on the company’s overall usage.
Large Use / Class A
- Large commercial and industrial customers
- Peak demand typically above 1 MW (with some eligibility requirements) or 500kW (for certain industries)
- Global Adjustment (Calculated based on contribution to highest peak demand periods)
Ontario Class A Power Bill Example:
Class A customers have the highest demand charges, which impacts distribution, transmission and global adjustments.
Unlike general service businesses with demand over 50 KW, Global adjustment charges for Class A businesses are calculated based on the property’s usage contribution to the 5 highest demand hours in a 12-month cycle (peak demand factor). The key for class A customers to lower bills is to reduce consumption during those critical peak periods.
The Main Sections of Your Bill
Most Ontario commercial bills are divided into four main categories:
- Electricity (Commodity)
- Delivery
- Regulatory Charges
- Ontario Electricity Rebate (For eligible customers only)
Let’s break each one down based on your class.
Electricity Charges (Commodity)
This is the actual cost of the electricity you use.
A. Energy Charge (kWh)
You are charged for total electricity consumed, measured in kilowatt-hours (kWh).
For smaller commercial customers under the Regulated Price Plan (RPP):
- You may be billed under:
- Time-of-Use (TOU) pricing (on-peak, mid-peak, off-peak)
- Tiered pricing
- Ultra Low Overnight
- Example Bill (tiered)
For larger commercial customers:
- You typically pay the Ontario Electricity Market Price
Example Bill:
B. Demand Charge (kW)
If your business is GS > 50 kW, you will likely see a demand charge
- Measured in kilowatts (kW)
- Based on your highest 15-minute usage interval during the billing period
- Charged per kW
This means one short spike in electricity use can significantly increase your bill.
Example:
If your peak demand is 120 kW and the demand rate is $15/kW:
120 × $15 = $1,800 in demand charges
Demand charges often represent a large portion of commercial bills.
C. Global Adjustment (GA)
The Global Adjustment covers the cost of:
- Renewable energy contracts
- Nuclear refurbishment
- Conservation programs
- Capacity payments
This is often one of the largest line items on commercial bills.
How It’s Calculated
- Class B customers (most small and mid-sized businesses):
- Pay GA based on total kWh consumed.
- Class A customers (large users):
- Pay GA based on their contribution to Ontario’s five annual peak demand hours.
- This is calculated using a “Peak Demand Factor.”
For many businesses, Global Adjustment can equal or exceed the energy charge itself.
Delivery Charges
Delivery charges cover the cost of moving electricity from power plants to your building.
These charges are regulated by the Ontario Energy Board (OEB).
Delivery includes:
A. Transmission
- High-voltage lines that move power across the province.
B. Distribution
- Local poles and wires operated by your Local Distribution Company (LDC), such as:
- Toronto Hydro
- Alectra
- Hydro One
- Others
C. Fixed Service Charges
- Monthly flat fees for connection and metering.
D. Variable Delivery Charges
- Charged per kWh or per kW of demand.
Even if you reduce energy use, fixed delivery charges still apply.
Regulatory Charges
These support the operation of Ontario’s electricity system.
They fund:
- The Independent Electricity System Operator (IESO)
- Market administration
- Reliability oversight
Regulatory charges are usually billed per kWh consumed.
Key Numbers Every Business Should Watch
To better manage costs, focus on:
1. Total kWh (Energy Consumption)
Indicates overall usage.
2. Peak Demand (kW)
One short spike can significantly increase costs.
3. Global Adjustment Line
Often one of the largest components.
4. Cost per kWh (Blended Rate)
Total bill ÷ total kWh
This gives you your true electricity cost.
How Class B and Class A Ontario Businesses Can Lower Energy Expenses
Ontario commercial electricity bills are complex because they reflect more than just energy use — they include infrastructure costs, system reliability, long-term generation contracts, and regulatory oversight.
By understanding:
- Your rate class
- How demand charges work
- How Global Adjustment is calculated
- The difference between energy and delivery charges
The biggest way for businesses to lower power expenses is to find ways to
- Use less energy during
- Reduce usage during peak periods
- Upgrade the property with energy efficiency in mind
- Installing on-site renewable energy generation
- Installing battery storage units
One path many businesses are now looking into is finding on site generation and storage to provide flexibility, especially during peak moments. Ontario has some of the highest solar incentives available for businesses. If you’d like to learn more, please fill out our quick survey to qualify.
