minister’s directive

to: the independent electricity system operator

I, Todd Smith, Minister of Energy (Minister), 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

In January 2021, our government introduced a four-year electricity CDM procurement initiative (CDM Framework), through a Directive to the IESO as approved by the Lieutenant Governor in Council pursuant to Order-in-Council No. 1351/2020 dated September 30, 2020 (CDM Framework Directive).

As Ontario recovers from the covid-19 pandemic, the 2021-2024 CDM Framework is providing continued opportunities for electricity consumers to manage their electricity costs, stability for the network of companies involved in the delivery of CDM programs in the province, and an important tool to cost-effectively meet electricity system needs.

Emerging System Needs

After more than a decade of stable electricity supply, and at times, a surplus, the IESO has forecasted a capacity need that emerges in 2025 and grows through the latter part of the decade. This is a result of increased demand due to expanding electrification and increasing business investment in the province, the upcoming closure of the Pickering Nuclear Generating Station, and the refurbishment schedules of other nuclear facilities.

Fulfilling this forecasted supply need will require the IESO to procure electricity products and services from both existing and new resources. Earlier this year, I asked the IESO to also consider cost-effective enhancements to the province’s energy efficiency programs.

Energy efficiency programs have the potential to generate significant savings for ratepayers, lowering electricity costs. Moreover, they help to reduce our dependence on natural gas electricity generation, which is a priority for the government.

In response to my letter dated April 4, 2022, the IESO has advised that new or expanded CDM programs (CDM Program Enhancements) could help respond to upcoming system needs. The government is supportive of these recommendations in their entirety.

Support for Distributor Projects

The government is supportive of electricity distributors taking the lead on CDM opportunities eligible for distribution rate-funding under the Ontario Energy Board (OEB)’s December 2021 CDM Guidelines for Electricity Distributors. Moreover, I look to the IESO to support, where possible, the distributors’ CDM applications to the OEB for rate-funding that are in the best interest of Ontario electricity ratepayers and program customers. By the IESO working together with local distribution companies, which can leverage their close customer connections, there are opportunities to provide value for ratepayers and support both local and system reliability.

Directive

Therefore, in accordance with the authority under section 25.32 of the Act, I hereby direct the IESO as follows:

  1. Section B.2 of the CDM Framework Directive is deleted in its entirety and replaced with the following:

    “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 (including municipalities), 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;
    3. Low-income and income-eligible residential consumers; and
    4. Residential consumers who are eligible to participate in a new residential demand response program delivering peak demand reductions.”
  2. Section F.2 of the CDM Framework Directive is deleted in its entirety and replaced with the following:

    “2. The IESO shall not exceed a total budget of $1.034 billion for the Term and the budget shall be allocated as follows:

    1. Up to $799 million for CDM programs described in paragraphs (a) and (d) of section B.2, section B.3 and section B.4, provided that:
      1. Up to $136 million shall be allocated to CDM measures targeted at indoor agricultural facilities in Southwest Ontario; and
      2. Any unspent portion of the amount described in clause (i) may be re-allocated by the IESO among other CDM programs outlined in this paragraph (a) of section F.2;
    2. Up to $43 million for central services costs and payments related to the CDM programs described in paragraphs (a) and (d) 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. Section G.1 of the CDM Framework Directive is amended by adding the following paragraph at the end:

    “f. Updates on the status of the CDM Program Enhancements.”

  4. The CDM Framework Directive is amended by adding a new section under the heading “G. Program and Target Mid-Term Review”, as follows:

    “2. As part of the mid-term review, the IESO shall explore opportunities for regulated distributors to build on IESO CDM programs where they can add value to their distribution system. This may include support for distributors’ CDM applications to the OEB for distribution rate funding that are in the best interest of Ontario electricity ratepayers and program customers.”

General

For greater clarity, all other terms of the CDM Framework Directive shall remain in full force and effect.

This Directive takes effect on the date it is issued.

Order in Council 1314/2022