Why Ontario’s New Hydro Rates Are a Tax on Your Profits
If you manage a commercial facility in Ontario, you likely noticed a change on November 1st. While the headlines focused on residential rebates, a structural shift occurred in how businesses are billed for power. The Ontario Energy Board’s (OEB) new Ultra-Low Overnight (ULO) price plan has introduced a punitive On-Peak rate of 39.1¢/kWh between 4:00 PM and 9:00 PM.
For a manufacturing plant running a second shift or a logistics centre processing afternoon shipments, this isn’t just inflation—it’s a direct tax on your productivity. You can verify the full rate schedule on the OEB website here: https://www.oeb.ca/newsroom/2025/ontario-energy-board-announces-changes-electricity-prices-households-small-businesses
Historically, the spread between on-peak and off-peak rates was manageable. Today, the gap is a chasm. Using grid power during late afternoon hours is now nearly 10x more expensive than overnight rates. This pricing structure is designed to force load shifting, but for most businesses, shutting down operations at 4:00 PM isn’t an option.
The “Solar Hedge” Strategy This is where the strategic value of commercial solar shifts from “sustainability” to “defense.” Solar production follows a bell curve that aligns almost perfectly with the mid-day and early-evening peaks.
By generating your own power “behind-the-meter,” you aren’t just offsetting kilowatt-hours; you are specifically shaving off the most expensive electrons you would otherwise buy. You are effectively opting out of the 39.1¢ rate.
The 2025 Financial Lever: The “Tax Stack” Defending your margins is critical, but financing the defense is easier than ever. 2025 has introduced a rare convergence of federal incentives:
- 30% Refundable ITC: A direct cash refund on the capital cost of your system.
- Reinstated 100% CCA: The ability to write off 100% of the remaining asset value in Year 1.
The government is offering to pay for the majority of a system that protects you from their own rate hikes. The math has never been clearer. If your facility operates between 4 PM and 9 PM, doing nothing is now the most expensive option on the table.
Frequently Asked Questions (FAQ)
- How much did Ontario electricity rates increase in 2025? As of November 1, 2025, the new Ultra-Low Overnight (ULO) On-Peak rate increased to 39.1¢/kWh, a significant jump that penalizes consumption between 4:00 PM and 9:00 PM.
- Can solar panels reduce Global Adjustment charges? Yes. For Class A customers, solar can reduce your Peak Demand Factor (PDF) by lowering your draw from the grid during the top 5 system peaks. Learn more about Global Adjustment components here.
- What is “peak shaving” with solar energy? Peak shaving is the practice of using solar energy to power your facility during times when grid electricity prices are highest (On-Peak hours), effectively lowering your blended cost of energy.
