September 30, 2020

WHEREAS the Government remains committed to ensuring that Ontario has an affordable and reliable electricity system, while continuing to find efficiencies in the electricity sector;

AND WHEREAS it is desirable that the Independent Electricity System Operator (IESO) establish a new four-year electricity conservation and demand management (CDM) framework aimed at offering a suite of centrally-delivered CDM programs to help consumers, including commercial, industrial, institutional and on-reserve First Nations consumers, as well as low-income and income-eligible residential consumers, manage their electricity use while meeting electricity system needs;

AND WHEREAS the Minister of Energy, Northern Development and Mines may, with the approval of the Lieutenant Governor in Council, issue directives under subsection 25.32(5) of the Electricity Act, 1998 that require the IESO to undertake any initiative or activity that relates to measures related to the conservation of electricity or the management of electricity demand;

NOW THEREFORE the Directive attached hereto is approved.

Background

In March 2019, our government directed the IESO to immediately discontinue the 2015- 2020 Conservation First Framework and replace it with a 2019-2020 Interim Framework that streamlined and centralized program delivery. Under the Interim Framework, electricity CDM programs were refocused to those who need them most, including low­ income households, First Nations communities, as well as commercial, institutional and industrial consumers.

The outbreak of the Novel Coronavirus (COVID-19) in Ontario in early 2020 has had a significant impact on electricity consumers, the electricity system and Ontario's economy. Our government recognizes that electricity CDM programs help consumers manage their energy costs, help cost-effectively meet system needs and are an important contributor to Ontario's economy.

Our government is now introducing a new four-year electricity CDM procurement initiative (COM Framework) that would apply immediately after the term of the current Interim Framework ends, launching on January 1, 2021.

As Ontario recovers from the COVID-19 pandemic, the 2021-2024 CDM Framework will provide continued opportunities for electricity consumers to manage their electricity costs, provide stability for the network of companies involved in the delivery of CDM programs in the province and help to cost-effectively meet electricity system needs.

Overview of CDM Programs

The new CDM Framework will focus on cost-effectively meeting the needs of Ontario's electricity system, including by focusing on the achievement of provincial peak demand reductions, as well as targeted approaches to address regional and/or local electricity system needs. Recognizing limited forecasted needs in the CDM Framework's first two years, programs will be designed to maintain program delivery capacity in the province and meet consumer needs, while enabling a ramp up of program offerings in 2023. Through a mid-term review, electricity system needs will be reassessed and consideration will be given to the need for changes to the programs, targets and budgets of the CDM Framework.

The new CDM Framework will leverage competitive procurements and calls for proposals in order to increase competition, improve cost-effectiveness and solicit consumer-based solutions.

Programs under the new CDM Framework will continue to be targeted to those who need them the most, including commercial, industrial, institutional and on-reserve First Nations consumers, as well as low-income and income-eligible consumers.

CDM programs for commercial, industrial and institutional consumers will continue to support business competitiveness and the province's economic recovery, helping businesses improve their productivity and manage costs.

Residential and other consumers will be provided with tools and guidance to help improve their energy efficiency, as well as any regional and/or local programs that may be brought forward through competitive mechanisms.

Overview of Programs for Low-Income and Income Eligible Consumers and First Nations Communities

The government is also renewing programming for low-income and income-eligible consumers and on-reserve First Nations communities across Ontario.

For low-income and income-eligible consumers, access to energy saving measures will be simplified as a single program will be launched to deliver the benefits of two existing programs, the Affordability Fund Program and the Home Assistance Program, in an effort to reduce confusion and enhance customer experience.

For on-reserve First Nations communities, programs under the Interim Framework that were suspended due to the outbreak of COVI0-19 will be relaunched, to allow time for committed projects to be completed. In mid-2021, the programs may evolve based on additional engagement with Ontario's First Nations communities in an effort to respond to changing community needs, while building on the success of previous programs.

DIRECTIVE

Therefore, in accordance with the authority I have pursuant to subsection 25.32(5) of the Act, I hereby direct the IESO to design, coordinate, deliver, and/or fund the delivery of electricity CDM programs outlined in this Directive in accordance with the following requirements.

REQUIREMENTS

A. Governance

1. The IESO shall be directly responsible to deliver the CDM programs, utilizing procurement contracts in connection with those programs as required.
2. To the degree reasonably practicable, the IESO will coordinate the delivery of the CDM programs with entities delivering natural gas Demand Side Management programs.

B. CDM Programs

1. The CDM programs shall be designed to address province-wide and regional and/or local electricity system needs as identified in bulk, regional or distributor planning processes.
2. The IESO shall centrally deliver CDM programs to the following consumer segments or communities who are connected to the IESO-controlled grid or to a regulated distributor's distribution system that is connected to the IESO-controlled grid:
1. Commercial, institutional or industrial consumers;
2. On-reserve First Nations communities, including those communities that are soon to be connected to the IESO-controlled grid or to a regulated distributor's distribution system that is connected to the IESO-controlled grid; and
3. Low-income and income-eligible residential consumers.
3. The IESO shall procure, through competitive mechanisms , measures to address regional and/or local electricity system needs, including through local CDM programs, projects or pilots.
4. The IESO shall also provide residential and other consumers with a suite of online tools, guidelines and information to build awareness of widely available conservation and demand management measures and provide education on energy efficient practices and behaviours.
5. The IESO shall implement only those CDM programs that demonstrate positive cost­ benefit benchmarks when jointly considered as a portfolio in accordance with the IESO's Cost-Effectiveness Guide. For clarity, programs described in sections C and D of this Directive will not be required to meet these cost-benefit benchmarks and shall be excluded from the portfolio of CDM programs required to meet such benchmarks.

C. Energy Affordability Program

1. The IESO shall design, coordinate, deliver and fund an income-tested residential program, which will provide different tiers of support based on income eligibility, with the majority of the support provided to low-income households ("Energy Affordability Program").
2. The Energy Affordability Program shall provide electricity saving measures to participants based on an assessment of needs and projected efficiency gains in the home.
3. Despite the Energy Affordability Program not being required to meet cost-benefit benchmarks, the IESO shall nevertheless ensure that this program is designed and delivered in as cost-effective a manner as is reasonably practicable and in a manner that results in impactful electricity bill savings for those most in need of support.

D. On-reserve First Nations Programs

1. The IESO shall work to complete delivery and funding of projects planned under the following three First Nations programs that the IESO delivered under the procurement initiative known as the Interim Framework that was established under the Minister's Directive issued to the IESO on March 21, 2019, as approved by the Lieutenant Governor in Council pursuant to Order-in-Council No. 379/2019: the First Nations Conservation Program, the Conservation on the Coast Program, and the Remote First Nations Energy Efficiency Pilot Program.
2. As the projects under the three programs described in section D.1 are progressing and concluding, the IESO shall design, coordinate, deliver and fund new First Nations programs based on input received from First Nations communities and the Minister.
3. Despite First Nations programs not being required to meet cost-benefit benchmarks, the IESO shall nevertheless ensure that these programs are designed and delivered in as cost-effective a manner as is reasonably practicable and in a manner that results in impactful electricity bill savings for those most in need of support.

E. Definition of CDM

1. The IESO shall consider CDM to be inclusive of activities aimed at reducing peak electricity demand and/or electricity consumption from the electricity system. Examples of CDM include energy efficiency replacements whereby similar output is achieved with less electricity, and behind-the-meter consumer generation.
2. However, for the purposes of the CDM programs , the IESO shall consider CDM to exclude:
1. Those measures promoted through a different program or initiative undertaken by the Government of Ontario or the IESO; and
2. Behind-the-meter consumer generation that uses fossil fuels purchased from or otherwise supplied by a third party as a primary fuel source.

F. Term and Limits of Funding

1. The IESO shall make CDM programs available from January 1, 2021 to December 31, 2024 (Term), and no application to the IESO or to other parties involved in the delivery of the CDM programs shall be accepted or approved after the end of the Term.
2. The IESO shall not exceed a total budget of $692 million for the Term and the budget shall be allocated as follows:
1. Up to $457 million for CDM programs described in paragraph (a) of section B.2, section B.3 and section B.4;
2. Up to $43 million for central services costs and payments related to the CDM programs described in paragraph (a) of section B.2, section B.3 and section B.4, which shall be inclusive of costs and payments for marketing, Evaluation, Measure and Verification (EM&V), compliance, capacity building and customer support;
3. Up to $156 million for the Energy Affordability Program; and
4. Up to $36 million for programs targeting on-reserve First Nations communities.
3. The IESO shall not re-allocate unspent funds between the budget allocations outlined in section F.2.

G. Program and Target Mid-Term Review

1. The IESO shall submit a report to the Minister no later than December 31, 2022 following the completion of a formal mid-term review of:
1. The alignment of the demand reduction target, electricity target and the CDM Framework budget with the provincial, regional and/or local electricity system needs as identified by the IESO;
2. The alignment of the CDM program offerings with consumer needs in Ontario, and a comparison against programs from other jurisdictions;
3. Lessons learned and recommendations from competitive mechanisms for procuring energy efficiency resources, including results to date of the Energy Efficiency Auction Pilot;
4. The progress and impact of CDM programs, including for low-income and income-eligible consumers and on-reserve First Nations consumers; and
5. Recommendations on the remainder of the CDM Framework. 

H. CDM Plan; Evaluation and Reporting

1. By December 1, 2020, the IESO will deliver to the Ministry of Energy, Northern Development and Mines (Ministry) a CDM plan (Plan) for the Term, including details of the CDM programs that will be offered, their estimated annual costs and expected peak demand reduction and energy savings results. The expected savings of electricity and the expected demand reductions will constitute the targets for the Term, which will respectively be known as the "electricity target" and "demand reduction target" (collectively, the CDM Targets).
2. The IESO shall evaluate, in such frequency as the IESO considers appropriate, incremental electricity savings and peak demand reductions achieved by the CDM programs based on the IESO's EM&V protocols and requirements.
3. The IESO will report achievements to the Ministry, including:
1. Quarterly, by each CDM program and in aggregate, including but not limited to: participation, electricity and demand savings, greenhouse gas (GHG) emission reductions, as well as forecasted participation for that year, electricity and demand savings and GHG emission reductions throughout the life of the CDM programs;
2. Quarterly financial reporting, by each CDM program and in aggregate, including but not limited to: payments disbursed and costs committed in the previous quarter and forecasted disbursements and commitments throughout the life of the CDM programs ;
3. Quarterly, or as appropriate, additional achievements for programs targeting low-income and income-eligible consumers and on-reserve First Nations consumers, including:
1. Non-energy benefits, e.g., home safety and comfort;
2. Province-wide coverage;
3. Progress towards yearly enrolment targets; and
4. Participant satisfaction, where feasible;
4. As required, lessons learned, upcoming issues, recommended program changes and proposed timelines for any changes; and
5. As required, or specified by the Ministry from time to time, any other information, as may be required by the Ministry or deemed relevant for reporting by the IESO.
4. The IESO shall continue to produce and publish annual reports detailing the overall progress of the COM programs from the period of January 1 to December 31 of the previous year.