1. The Ontario Energy Board and Demand-Side Management
Cathy Spoel
Ontario Energy Board
Toronto, Ontario
September 8, 2004

2. The Ontario Energy Board
Independent crown corporation established under the Ontario Energy Board Act, 1998
Economic regulator of electricity and natural gas
Conducts open processes to address energy regulation
Issues Orders, Rules, Licences and Codes that are binding on energy sector participants

3. The Board’s Natural Gas Experience
Since 1993, the two major gas utilities in Ontario have managed Demand Side Management portfolios within the framework set out in Board Decision EBO169-III.
programs are offered through the gas utilities, energy services companies, and channel partners
commitments set and monitored through DSM consultative process
The Board approves the ratemaking implications of utilities’ DSM investments and expenditures

4. Earlier Electricity Experience
In 1990, Ontario Hydro’s DSMactivities generated net annual system savings of approximately 220 MW
programs were offered through Ontario Hydro, energy services companies, and channel partners
several Municipal Electric Utilities cooperated with Ontario Hydro, or acted independently, in the promotion and delivery of DSM
The Board reviewed Ontario Hydro’s plans and supported the utility’s direction

5. Electricity Distribution Rate Adjustment and Conservation
May 31, 2004
Minister of Energy authorized electricity distributors to apply to the Board for their final rate adjustment effective March 1, 2005 (so-called “3rd tranche” of Market Adjustment Revenue Requirement, MARR)
Eligibility conditional on distributor spending one year’s worth of the monies on conservation and demand management (approx. $225 million if all distributors apply)
July 16, 2004
The Board issued preliminary guidelines and instructions for deferral accounts
August 30, 2004
The Board issued information bulletin on pre-approval of activities

6. Board Process for Distributor “3rd Tranche”

7. Key Issues Prudence Review of “3rd Tranche” Spending
Distributors have until September 30, 2007 to complete “3rd tranche” spending
Prudence review will focus on whether:
funds have been spent in accordance with the distributor’s plan; and
whether the commitments in the distributor’s conservation and demand management plan have been met

8. Key Issues Revenue Protection for Distributors
Distribution revenues vary with energy consumption of a distributor’s customers
Successful conservation can erode a distributor’s bottom line
The Board intends to develop an “interim” revenue protection mechanism in time for distributor applications for May 2006 distribution rates

9. Key Issues Cost Recovery After 3rd Tranche Spending
A distributor’s conservation and demand management expenditures might exceed their 3rd tranche allowance
The Board intends to develop an “interim” cost recovery mechanism in time for distributor applications for May 2006 distribution rates

10. Key Issues Distribution Line Losses
Power consumers bear the full cost of energy losses in distribution systems
Distributors have no financial incentive to take steps to reduce these losses
The Board may identify and remove any disincentives that distributors have to improve their losses as part of rate making for 2006

11. Progression to Sustainable Regulatory Framework
Consultation and review on progression to a sustainable regulatory framework
Expect to commence work after interim solutions on revenue protection and cost recovery are developed for 2006 distribution rates
Take into account the activities of the Ontario Power Authority’s Conservation Bureau (including monitoring and evaluation methodologies)
Learn from experience with the revenue protection and cost recovery mechanisms to be used in 2006

12. Thank you!