1. 1 CDM Study October 19, 2011 Stan But Manager, Economics & Load Forecasting

2. 2 Agenda OEB Directive Stakeholder Recommendations CDM Study Objectives Study Findings Preliminary CDM Impacts for 2011- 2013 Summary

3. 3 OEB Directive In its Decision with Reasons for EB-2010-0002, the Board noted the following: – there does not appear to be a broadly accepted methodology in place to identify reasonably anticipated effects of any CDM program on the throughput of the respective distribution or transmission systems. –For the purposes of establishing credible load forecasts, much more acuity than is currently available is needed. The Board accepted Hydro Ones CDM estimates used in the load forecast, but directed Hydro One to work with the OPA in devising a robust, effective and accurate means of measuring the expected impacts of CDM programs.

4. 4 Stakeholder Recommendations Hydro One held two stakeholder consultations in February and March 2011 Below is a summary of recommendations from the above sessions: –An in-house study prepared by Hydro One staff instead of an external study by consultant –A review of CDM categories and methodologies to incorporate the CDM impacts into the load forecast used by utilities in other jurisdictions –CDM categories should be comprehensive and can be tracked –Hydro One should work closely with the OPA to better define and measure CDM impacts for use in its load forecast –CDM impacts should be presented by customer class

5. 5 CDM Study Objectives Objective 1: Develop a robust methodology to forecast CDM impacts using comprehensive and well-defined categories Objective 2: Develop a methodology to incorporate the CDM impacts into Hydro Ones load forecast

6. 6 Study Findings Literature Review Utilities reviewed: –British Columbia, New York and California as recommended by stakeholders –Other major utilities in North America with CDM experience Tools used: web-search and personal communication

7. 7 Study Findings Load Forecast Survey A web-based survey was sent to about 100 utilities/organizations in North America and 41 responses were received The literature review and the survey provided a list of well-defined and comprehensive CDM categories: Programs initiated by the utility Program initiated by other organizations Building codes and appliance efficiency standards Rate structures Increased conservation effect

8. 8 Study Findings Load Forecast Survey (Contd…) Three methods are commonly used to incorporate CDM impacts in the load forecast: Method 1: Forecast using actual load (without any CDM adjustment) Method 2: Forecast CDM impacts as an explanatory variable on the right hand side of the econometric equation Method 3: Add back historical CDM impacts to the actual load and then forecast forward

9. 9 Study Findings Review of load forecast methodologies for incorporating CDM in the load forecast Hydro One undertook a review of the three methods to evaluate the advantages and challenges associated with each method The review results suggested that: –Method 3 is the most robust, technically sound and efficient and it produces reliable and accurate load forecasts –Method 3 addresses the OEB directive to apply a methodology that is less primitive and that provides more acuity Hydro One has adopted Method 3

10. 10 Study Findings Alignment with the OPA

11. 11 Study Findings Alignment with the OPA (Contd…) –Hydro One worked closely with the OPA to better understand the savings assumptions used in their current conservation forecast Step 1 Obtain detailed savings assumptions for each CDM category Step 2 Determine Hydro One specific annual CDM savings by sector Step 3 Derive monthly CDM savings using Hydro One specific load shapes Step 4 Derive CDM savings by rate class

12. 12 Preliminary CDM Impacts for 2011-2013

13. 13 Summary –The literature review provided a list of well-defined and comprehensive categories –The survey results helped Hydro One better understand the methodologies used by utilities to incorporate CDM impacts into the load forecast –The comparative review of methodologies helped identify an effective and efficient method to incorporate CDM in the load forecast –Hydro One worked closely with the OPA to derive CDM forecast specific to Hydro One –Hydro One believes that the CDM study incorporates all recommendations from stakeholders and meets the Boards Directive

14. 14 Thank You