The LDC's role in CDM: The new CDM Code

An IndEco article

By: Sura Abdul-Razzak

Update 2010-09-16: The final CDM Code was released on September 16th. Click here for a summary of the key components.

Since our article “Gearing up for the Green Energy Act: The LDC and CDM” was published in the EDA Distributor in November 2009, there have been some new related developments that we explore in this update.

Ministerial Directive to the Ontario Energy Board

The Minister of Energy signed the long-awaited Directive on conservation and demand management (CDM) to the Ontario Energy Board (OEB) on March 31st, 2010; the OEB posted the Directive on its website on April 28, 2010. The Directive directs the OEB to specify reductions in electricity consumption and reductions in peak electricity demand to be met through CDM programs (the “CDM Targets”) as a condition of each LDC’s licence. Each LDC must achieve its CDM targets over the four-year period beginning January 1, 2011.

The OEB will distribute the targets among the LDCs based on the total reduction target of 1330 megawatts (MW) of provincial peak reduction and 6000 gigawatt hours (GWh) of reduced electricity consumption over the four-year period. The Minister has directed the OEB to establish the LDC targets without a hearing. In setting the targets the OEB must take into account the information the OPA has obtained regarding peak reductions and electricity consumption achieved by each of the LDCs in delivering their CDM programs to date.

LDCs may meet their targets through Board-Approved CDM Programs, OPA-Contracted Province-Wide CDM programs, or a combination of both. The OEB is expecting that LDCs will implement at least some of the OPA-Contracted Province-Wide CDM programs. The LDC must deliver a mix of CDM programs to all consumer types in the distributor’s service area.

The OEB issued a letter to LDCs describing the proposed allocation of the CDM targets and the methodology used for allocation. The letter invited LDC and broad stakeholder comment on the targets and the methodology. Taking into account the comments received, the OEB will finalize the targets and target-setting methodology and expects to release the final targets and methodology before the November 1st CDM Strategy deadline.

The LDC licence will require that distributors use the same common Provincial brand that will be identified by the Board or Ministry as the provincial mark/logo for its conservation programs for all Board-Approved CDM programs. This brand will be the same as that used by the OPA and distributors for OPA-Contracted Province-Wide CDM Programs. LDCs will use the provincial brand with or co-branded with the distributor’s own brand.

The CDM Code and its requirements

The Ministerial Directive also directs the OEB to issue a CDM Code that will set the rules for LDCs regarding CDM. The finalized Code was released on September 16, 2010 and includes rules relating to reporting requirements and performance of CDM programs and to the planning, design, approval, implementation, and the evaluation, measurement, and verification (E,M&V) of Board-Approved CDM Programs. The Code defines CDM to include load reductions from geothermal heating and cooling, solar heating, and fuel-switching, but exclusive of initiatives associated with the OPA Feed-in Tariff Program and the Micro Feed-in Tariff Program, as well as programs that relate to an investment in new infrastructure, replacement of existing infrastructure, relate to any measures an LDC uses to maximize the efficiency of new or existing infrastructure. Board-Approved CDM Programs can include the delivery of CDM programs to low-income consumers to meet a portion of the distributor’s CDM target.

The final CDM Code has the following key changes from the earlier version:
The LDC can earn more incentive once the 80% threshold for the demand and energy savings target is met
Low-income programs take on greater importance and Board-Approved low-income programs need not be cost-effective
LDCs must hold the environmental attributes of Board-Approved Programs but are not entitled to be the beneficiary of them.

Click here for a more detailed discussion of the CDM Code.

“Gearing up for the Green Energy Act: The LDC and CDM" published in the The Distributor in November 2009:

Gearing up for the Green Energy Act: the LDC and CDM - 82KB

Source document

"Gearing up for the Green Energy Act" article reprinted with permission from The Distributor magazine of the Ontario Electricity Distributors Association, November 2009.

Related information

Highlights from the proposed CDM Code and OEB letter on CDM targets