OEB Staff Provide Guidance About Continuing Customer Eligibility for ICI Program After CDM Reduces Customer Demand

On December 19, 2022, Ontario Energy Board staff (OEB staff) issued a bulletin titled Administering the Industrial Conservation Initiative – Continued Class A Status for Consumers who Implement Conservation Measures. The bulletin provides guidance to Ontario electricity distributors (LDCs) and consumers about when consumers can continue to qualify for the Industrial Conservation Incentive (ICI) even where their average monthly demand falls below the eligibility threshold. The ICI program allows a participant to manage and save costs related to the Global Adjustment (GA). The bulletin explains that where the customer is a participant in conservation and demand management (CDM) initiatives that reduce demand below the eligibility threshold, the customer can continue to qualify for ICI even years after participating in the CDM program.

The eligibility requirements for the ICI are set out in Ontario Regulation 429/04 under the Electricity Act (GA Regulation). To be eligible, companies must have an average monthly peak demand for a single load of greater than 1 MW (500 kW for certain industries) during an annual base period from May 1 to April 30 of the prior year.

The ICI program allows participating companies to manage their GA costs by reducing their consumption during peak periods. Eligible companies pay GA based on their percentage contribution to the top-five peak Ontario demand-hours over the 12-month base period. Annually, the Independent Electricity System Operator (IESO) establishes the top-five demand peaks for the preceding base period. Each customer’s corresponding portion of peak demand is then calculated based on its consumption during those five hours. The better companies can forecast the five hours of peak demand and shift demand accordingly, the more they can take advantage of the ICI.

The GA Regulation permits Class A consumers who participate in certain conservation and demand management (CDM) initiatives to remain in the ICI even if their average monthly peak demand falls below the applicable eligibility threshold. The eligible CDM initiatives are those offered/administered by the IESO or LDCs. 

From time to time, OEB staff have issued bulletins providing guidance to LDCs and consumers about administration of the ICI program. Previous bulletins address common questions about administering the ICI and special rules for ICI administration during the pandemic (see here).

In their most recent bulletin, OEB staff address the scenario where a customer who had been eligible for the ICI program sees its demand drop below the eligibility threshold after having participated in a CDM initiative. As noted, this customer will continue to qualify for the ICI program. In the bulletin, OEB staff explain their view that a consumer’s participation in a CDM program need not be in the most recent adjustment/base period for the customer to continue to qualify for the ICI program. The premise is that a CDM initiative undertaken in earlier years may continue to contribute to the customer’s reduced demand, and disentitling that customer from the ICI program would be a disincentive to invest in CDM. 

The bulletin also provides guidance to LDCs about what evidence should be required from customers to confirm continued ICI eligibility. OEB staff recommend that the LDC should seek simple written confirmation from the customer that they participated in a CDM initiative over the base period. Where the CDM program participation was in an earlier year (not the immediate prior base or adjustment period), then the LDC should seek written confirmation from the customer that the CDM initiative continues to have an effect on the customer’s average monthly demand. Unless the LDC has some reason to doubt this attestation (for example where the customer had shrunk its operations recently), then no further proof should be necessary. 

The bulletin concludes by reminding LDCs that the requirement for the customer to provide supporting information applies for each successive year where the customer seeks to continue its ICI eligibility.