Ontario Global Adjustment.
OPG regulated rates, negative GA components, and the outlook for GA mitigation.

The Global Adjustment (GA) is a monthly charge applied to all electricity consumers in Ontario. It covers the difference between the revenues that contracted and regulated generators earn in the wholesale spot market and the guaranteed or regulated rates they are entitled to receive. When the spot price is low, the GA is high. When the spot price rises, the GA falls. In some conditions, it can even turn negative for certain components.

The GA has three main components published by the IESO each month.

• GA-OPG. The net cost or credit associated with Ontario Power Generation's nuclear and regulated hydroelectric facilities, where OPG receives a regulated payment amount set by the OEB rather than the market price.
• GA-OPA. Costs related to contracts with gas-fired generators, renewable facilities, Bruce Power nuclear refurbishment, and conservation programs.
• GA-OEFC-NUG. Legacy contracts administered by the Ontario Electricity Financial Corporation with existing non-utility generators.

For Class A customers participating in the Industrial Conservation Initiative (ICI), GA exposure is determined not by monthly consumption alone but by their Peak Demand Factor (PDF), a measure of their share of Ontario demand during the province's top five coincident peak hours in the base period. Reducing load during those peaks is the core GA mitigation strategy for industrial customers.

OPG's nuclear and baseload hydro facilities do not sell into the spot market at competitive prices. Instead, the OEB approves a regulated payment amount for each facility type, providing OPG with a cost-of-service return on its regulated rate base. The IESO then calculates the monthly GA-OPG figure as the difference between the regulated payment amount and what OPG actually earned in the market, multiplied by output.

When the spot price is below the regulated rate, OPG receives a top-up through the GA pool and GA-OPG is positive. When the spot price rises above the regulated rate, OPG's market revenues exceed its regulated entitlement, and the surplus flows back to the GA pool as a negative contribution, reducing the total GA collected from consumers. This is settled every calendar month, not at year end.

Ontario's wholesale electricity market experienced a significant structural shift in 2025. Average spot prices rose by more than 90% compared to 2024, reaching their highest sustained level since 2005. Several factors drove this.

• Electricity demand from the IESO-controlled grid rose approximately 3.7%, reaching levels not seen since before the 2008 financial crisis, driven by electrification, industrial growth, and data centre load.
• Net exports reached a record high of approximately 18 to 19 TWh, with Quebec becoming Ontario's largest export destination for the first time.
• Nuclear output fell to its lowest share of the generation mix since 2003, partly due to planned outage cycles and the permanent closure of Pickering Units 1 and 4 in late 2024.
• Gas-fired generation continued its upward trend, but as the marginal price-setting resource, higher gas dispatch costs lifted market clearing prices.

OPG's current regulated nuclear payment amount, established under the 2022-2026 rate period, sits in the approximate range of $112 to $124 per MWh depending on the applicable rider and rate-smoothing adjustments in effect for a given year. When the Day-Ahead Ontario Zonal Price (the spot benchmark under the renewed IESO market that replaced HOEP in May 2025) regularly exceeds that level, GA-OPG turns negative each month. This dynamic has been visible in monthly IESO settlement data through the latter part of 2025 and into early 2026, providing a partial offset to other rising GA components.

The current OPG rate period runs through December 31, 2026. No rate change is expected before that date. Whether the negative GA-OPG condition persists depends on whether spot prices remain above OPG's regulated payment amount.

Factors that would sustain or deepen the offset

• Demand growth continues at recent rates, particularly from new industrial and data centre load.
• Export volumes remain elevated, tightening available domestic supply.
• Gas prices or outage conditions push marginal costs higher.

Factors that could reverse it

• A mild summer or autumn reducing peak demand and lowering spot prices.
• Increased imports or a return of lower-cost supply reducing market clearing prices.
• A significant increase in nuclear availability if maintenance outages are fewer or shorter than planned.

Pickering as a complicating factor

OPG has indicated it expects to remove all four Pickering B units from service for refurbishment at the end of Q3 2026, with refurbishment execution beginning in January 2027. Pickering historically supplied approximately 15% of Ontario's total electricity demand. The removal of this generation capacity is a significant supply-side contraction. All else equal, reduced supply supports higher spot prices, which would deepen any negative GA-OPG condition. However, the volume of OPG regulated output eligible to generate the offset would simultaneously shrink with Pickering offline, so the directional effect on actual customer bills is mixed.

The picture changes materially beginning January 1, 2027, when OPG's current rate period expires and new rates take effect, subject to OEB approval.

The OPG 2027-2031 rate application

On December 17, 2025, OPG filed a comprehensive application with the OEB for new regulated payment amounts covering the five-year period from January 1, 2027 to December 31, 2031. The application includes OPG's regulated nuclear and hydroelectric facilities as well as the Darlington New Nuclear Program (SMR) co-applicant. The OEB proceeding is expected to run through most of 2026.

OPG's proposed increases are substantial. The request is broadly understood to seek payment amounts approaching double the current nuclear rate, with two primary cost drivers.

• Pickering B refurbishment (approximately 60% of the cost increase). The $26.8 billion refurbishment of four Pickering units represents a major capital expenditure that OPG is seeking to begin recovering through regulated rates, including carrying costs during the refurbishment period.
• Darlington New Nuclear Program, SMR (approximately 25% of the cost increase). The first small modular reactor under construction at Darlington, with an estimated total cost of approximately $20.9 billion, is included as a regulated asset in this application.

Whether or not the OEB approves rates at the full quantum requested, the direction of travel is clearly upward.

What this means for GA-OPG from 2027 onward

When new, substantially higher regulated payment amounts take effect in 2027, the arithmetic of GA-OPG changes entirely. Unless spot prices also rise proportionally, GA-OPG will swing from a negative (credit) back to a strongly positive (cost) contribution.

Beyond the rate application itself, several structural pressures will bear on GA from 2027 onward.

• New capacity additions under IESO procurement programs and the Capacity Auction will add contracted generation to the GA-OPA component.
• The Pickering refurbishment period reduces Ontario supply through approximately 2034, requiring replacement capacity and sustaining upward pressure on spot and contracted costs alike.
• Electrification load growth is forecast to continue materially through the early 2030s, increasing the total energy quantum over which GA is spread, which partially moderates the per-MWh rate impact.

The Province has historically offset portions of GA-driven retail rate increases through the Ontario Electricity Rebate (OER). The OER was increased from 13.1% to 23.5% effective November 1, 2025, largely in response to the rate increases driven by the current pricing environment. Whether further rebate expansion will accompany the 2027 rate increases is a policy question. Industrial Class A customers participating in ICI are generally not eligible for the OER and will face the full rate increase directly.

• The current negative GA-OPG environment is a market-driven anomaly. It results from spot prices temporarily exceeding OPG's fixed regulated rate and will not persist if either spot prices fall or regulated rates increase.
• The benefit is automatic and does not require any action by ICI participants. It reduces the total GA pool against which their PDF is applied, lowering absolute bills for all Class A customers regardless of their peaking behaviour.
• The core value of ICI participation, minimizing PDF by shifting load off coincident peaks, remains as important as ever. The GA pool is expected to grow substantially from 2027 onward as new OPG payment amounts take effect alongside continued capacity contract additions.
• Clients should model their forward electricity costs using a range of assumptions for the 2027-2031 period, reflecting both the requested and a conservatively approved OPG payment amount. The upside risk to GA from 2027 onward is significant.
• The Pickering refurbishment period (2027-2034) represents both a supply risk and a regulatory risk. Tighter supply supports higher spot prices, which could partially offset higher regulated rates in the GA-OPG calculation, but the net effect on total costs is likely unfavourable compared to 2025 and 2026 conditions.