March 21, 2019

On the recommendation of the undersigned, the Lieutenant Governor of Ontario, by and with the advice and concurrence of the Executive Council of Ontario, orders that: 

WHEREAS the Minister of Energy, Northern Development and Mines (Minister) is 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 an interim electricity conservation and demand management (CDM) framework aimed at offering a suite of CDM programs centrally-delivered by the IESO;

AND WHEREAS the Minister 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.

I, Greg Rickford , Minister of Energy, Northern Development and Mines hereby direct the Independent Electricity System Operator (IESO) pursuant to subsection 25.32(5) of the Electricity Act, 1998 (Act) in regard to electricity conservation and demand management (CDM) procurement initiatives, as follows: 

Background

Our government is committed to ensuring that Ontario has an affordable and reliable electricity system, while continuing to find efficiencies in the electricity sector.

As our government continues to explore cost-effective electricity CDM initiatives designed to meet Ontario's needs in the future, an interim framework will be established, ending on December 31, 2020, aimed at offering a suite of electricity CDM programs centrally-delivered through the IESO (IESO CDM Programs). In addition, there will be an opportunity for Local Distribution Companies (LDCs) to apply for limited funding from the IESO for cost-effective local programs (LDC CDM Programs).

While we shift from an LDC-led delivery approach to a central IESO-led approach in the interest of cost efficiency, the overall customer experience will be of paramount importance. We are committed to ensuring that there is a smooth transition between the two approaches and that there continues to be cost-effective CDM opportunities.

In addition to this Directive, I intend to issue a directive to the Ontario Energy Board (OEB) to provide the OEB with the authority to amend or remove licence conditions for LDCs related to CDM. I also intend to issue a companion directive to the IESO to discontinue the 2015-2020 Conservation First Framework (CFF) and the Industrial Accelerator Program. 

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, as appropriate, according to the following principles and requirements. 

A. Principles

1. The IESO shall be directly responsible to deliver the IESO CDM Programs, utilizing procurement contracts in connection with those programs as required.
2. Electricity consumers connected to the IESO-controlled grid, and those connected to a distribution system will be eligible for the IESO CDM Programs. The IESO shall target the IESO CDM Programs to the following consumer segments:
   • commercial, institutional and industrial consumers;
   • low-income residential consumers; and
   • on-reserve First Nation communities, including communities that are or are soon to be connected to the IESO's controlled grid.
3. The IESO shall implement the IESO CDM Programs targeting commercial, institutional and industrial consumers that demonstrate positive cost benefit benchmarks when considered jointly as a portfolio in accordance with the IESO's cost-effectiveness guidelines. For clarity, on-reserve First Nations and low-income programs will not be required to meet cost benefit benchmarks.
4. For commercial, institutional and industrial consumers, the IESO should prioritize the IESO CDM Programs which yield high reductions in electricity usage (e.g. Gigawatt hours) and peak demand reductions (e.g. Megawatts) in a cost-effective manner.
5. To the degree reasonably practicable, the IESO will coordinate the delivery of the IESO CDM Programs with entities delivering natural gas Demand Side Management.
6. The IESO shall make limited funds available for LDCs to apply to design and deliver cost-effective LDC CDM Programs that are not duplicative of the IESO CDM Programs. Eligible LDC CDM Programs may target residential, on-reserve First Nations, low income, commercial, institutional and industrial consumers. LDC CDM Programs targeting residential, commercial, institutional and industrial consumers shall demonstrate positive cost benefit benchmarks independently in accordance with the IESO's cost-effectiveness guidelines. For clarity, LDC CDM Programs targeting on-reserve First Nations communities and low-income consumers will not be required to meet cost benefit benchmarks.  

B. Definition of CDM

1. For the purposes of the IESO CDM Programs and LDC CDM Programs, the IESO shall consider CDM to be inclusive of activities aimed at reducing electricity consumption and/or decreasing demand from the electricity grid. Examples of CDM include energy efficiency replacements whereby similar output is achieved with less electricity input and small scale (i.e., <10MW) behind the meter customer generation.
2. However, for the purposes of the IESO CDM Programs and LDC CDM Programs the IESO shall consider CDM to exclude those measures promoted through a different program or initiative undertaken by the Government of Ontario or the IESO, and behind the meter customer generation that uses fossil fuels purchased from or otherwise supplied by a third party as a primary fuel source. 

C. Term and Limits of Funding

1. The IESO shall make the IESO CDM Programs available from April 1, 2019, or as soon as possible thereafter, to December 31 , 2020 (Term) and no consumer applications to the IESO under the IESO CDM Programs or LDC applications to the IESO for LDC CDM Programs will be accepted or approved after the end of the Term.
2. The IESO shall not exceed a total budget of $353 million for the Term, which includes $27 million for any approved LDC CDM Programs as well as the $28M in central services costs and payments as described in section C.3.
3. The IESO will limit its central services costs and payments, which shall be inclusive of costs and payments for marketing, Evaluation, Measure and Verification (EM&V), compliance, capacity building and customer support, to $28 million for the Term. 

D. Design and Delivery

1. Within 1 month of the issuance of this Directive, 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 IESO CDM Programs that will be delivered, the estimated costs and expected results, and estimates of the budget for the LDC CDM Programs. 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" (CDM Targets).
2. The IESO shall evaluate any electricity and demand savings achieved by the IESO CDM Programs and LDC CDM Programs based on the IESO's EM&V protocols in such frequency as the IESO considers appropriate. 

E. Reporting

1. The IESO will report to the Ministry:
1. Quarterly, by each IESO CDM Program and in aggregate: participation, electricity and demand savings, as well as forecasted participation, electricity and demand savings throughout the life of the IESO CDM Programs.
2. Quarterly, financial reporting for payments disbursed and costs committed in the previous quarter and forecasted disbursements and commitments in throughout the life of the IESO CDM Programs.
3. As required, lessons learned, upcoming issues, recommended program changes and proposed timelines for any changes.
4. As required, any other information, as may be required by the Ministry.
2. The IESO shall continue to produce and publish annual reports detailing the overall progress of the IESO CDM Programs, LDC CDM Programs and annual incremental savings expected from provincial building codes and product standards.   

F. Low-Income and on-reserve First Nations

1. The IESO shall continue to fund and deliver the existing province-wide program, called the Home Assistance Program, targeted to low-income residential consumers on similar terms and in a similar manner as had been previously provided for under the CFF.
2. The IESO shall make best efforts to fund and deliver two local programs targeting on-reserve First Nations communities, where such programs are modelled, delivered and implemented on similar terms and in a similar manner as had been provided for under the First Nations Conservation Program and the Conservation on the Coast CM Program.
3. The IESO shall design, fund and deliver an electricity conservation pilot program targeted at residential consumers and small businesses in on-reserve First Nations communities that are, or are soon to be, connected to the IESO-controlled grid.
4. Despite IESO CDM Programs and LDC CDM Programs targeting on-reserve First Nations and low-income consumers 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 possible.