Minister’s Directive

To: The Independent Electricity System Operator

I, Stephen Lecce, Minister of Energy and Electrification (“Minister”), hereby direct the Independent Electricity System Operator (“IESO”) pursuant to subsection 25.32(5) of the Electricity Act, 1998 (“Act”) in regard to the procurement of measures related to the conservation of electricity or the management of electricity demand, as follows:

Background

Electricity efficiency is one of the least costly ways to address growing electricity system needs. Electricity efficiency programs are an established part of Ontario’s energy mix and provide continued opportunities for electricity consumers to manage their electricity costs, to help cost-effectively meet system needs, and provide economic opportunities for the network of companies involved in the delivery of energy efficiency programs and services. Programs that conserve electricity and manage electricity demand are expected to reduce electricity use in 2024 by about 9%.

Ontario’s electricity demand is expected to increase by 75% by 2050, as a result of economic development, housing for its growing population, and electrification. For every dollar put into energy efficiency there has been a $2 return in avoided energy generation costs.

Our government is proposing an electricity conservation and demand-side management procurement initiative (“eDSM Framework”) that has a 12-year term from January 1, 2025 to December 31, 2036, extendable subject to necessary approvals to:

  1. Support affordability: Ensure consumers have choice and access to programs to reduce their electricity bills and reduce the need to build new generation which is more costly;
  2. Support grid reliability: Maintain the reliability of the electricity system through cost-effective demand-side resources; and,
  3. Optimize customer experience to improve and maximize energy savings, including but not limited to:
    1. Creating a single delivery window for residential consumers for electricity and natural gas demand side management programs;
    2. Enabling greater consumer engagement on a regional level and allowing programs to help address local distribution system needs through the involvement of local electricity distributors; and,
    3. Moving to a rolling long-term Framework.

New energy efficiency programs will be focused on the following consumer segments: residential consumers (including income-qualified), business consumers (i.e., small business, medium-sized enterprises, agricultural, commercial, municipal, institutional and industrial), and on-reserve First Nation communities.

These programs are expected to help meet the needs of Ontario’s electricity system cost-effectively, including by focusing on capacity and electricity savings, supporting reliability, as well as targeted approaches to address regional or local electricity system needs and managing the gradual electrification of Ontario’s economy. Recognizing the forecasted system needs, and the increasing forecasts year over year as identified in the IESO’s most recent Annual Planning Outlook, programs should be designed to meet consumer needs, while enabling adjustments to increase or decrease program offerings in future years.

As part of this enduring Framework, the IESO will issue a plan every three years. A review would be scheduled to be completed in 2030, in the sixth year of the Framework, to verify that the budget and scope of the portfolio offerings remain appropriate based on system and consumer needs and give consideration to potentially extending the term of the Framework for up to another 6 years beyond 2036, subject to necessary approvals.

Programs under the Framework will help support energy affordability and customer choice for homes, competitiveness, productivity and cost management for businesses, as well as the province’s transition to a cleaner energy economy.

Directive

I hereby direct the IESO in respect of the delivery of electricity conservation and demand management measures as outlined in this Directive in accordance with the following requirements.

A. eDSM Framework

  1. The IESO shall launch the eDSM Framework on January 1, 2025.
  2. The IESO shall design, coordinate, deliver and/or fund the programs under the eDSM Framework. The electricity conservation and demand-side management (eDSM) programs shall be designed to address province-wide, regional or local electricity system needs as identified in bulk, regional or distribution planning processes.
  3. The IESO shall centrally deliver programs under the eDSM Framework to the following consumer segments or communities who are connected to the IESO-controlled grid or to a rate-regulated local electricity distributor’s (LDC) distribution system that is connected to the IESO-controlled grid:
    1. Residential consumers, including income-qualified;
    2. Small business, medium-sized enterprises, agricultural, commercial, municipal, institutional and industrial consumers; and,
    3. On-reserve First Nation communities, including those communities that are soon to be connected to the IESO-controlled grid or to an LDC’s distribution system that is connected to the IESO-controlled grid.
  4. The IESO shall pursue the creation of a single delivery window for programs described in sections B.2 and D of this Directive with Enbridge Gas Inc.’s (“Enbridge Gas”) residential and income-qualified natural gas demand-side management programs as approved by the Ontario Energy Board (“OEB”).
  5. Where reasonable, the IESO will coordinate the delivery of eDSM programs with entities delivering eDSM programs for other levels of government and entities delivering natural gas demand-side management programs.
  6. The IESO shall work with the OEB, where possible, to jointly guide the coordination and integration of eDSM programs with natural gas demand-side management programs as approved by the OEB.
  1. Except for programs described in sections D and E of this Directive, the IESO shall implement eDSM programs that demonstrate positive cost-benefit benchmarks when jointly considered as a portfolio in accordance with the IESO’s “Cost Effectiveness Guide for Energy Efficiency” dated May 16, 2022, or as amended from time to time.
  2. Programs described in sections D and E of this Directive shall be excluded from the portfolio of eDSM programs required to meet cost-benefit benchmarks as described in section A.7.
  3. The IESO shall enable and enhance capability-building initiatives for business and residential programs to support education and contractor training to maximize positive customer experience and electricity savings.
  4. In respect of each three-year period during the Term, as defined in section H.1, the IESO shall submit to the Ministry and subsequently publish an eDSM plan covering such three-year period. The plan shall be posted publicly before January 1 of the first year of the three-year period covered by the plan.
  5. Each eDSM plan shall include, at minimum, details of the eDSM programs that will be offered and the following information for each program under the eDSM Framework:
    1. The allocation of budget by year in accordance with section H.3;
    2. Forecasted electricity and peak demand savings; and,
    3. Cost-effectiveness metrics.
  6. The IESO shall be responsible for evaluation, measurement and verification (“EM&V”) of IESO-delivered programs under the eDSM Framework.
  7. The IESO shall ensure that the eDSM programs are marketed with consistent messaging under a common brand and (a) where appropriate, identify the role of the Province of Ontario, and (b) co-branded: (i) for programs described in section F.1(b), with marks of the relevant distributors; and (ii) where co-ordination or program co-delivery is implemented, the logos of other third-party entities.

B. Residential Programs

  1. The IESO shall continue to design, coordinate, deliver, and fund residential programs, including those initiated under the current conservation and demand management framework (as described in the Minister’s directive to the IESO that was approved by the Lieutenant Governor in Council pursuant to Order-in-Council 1351/2020 dated September 30, 2020, as amended) (the “2021–2024 CDM Framework”) and outlined in the IESO’s “2021-2024 Conservation and Demand Management Framework Program Plan” dated December 15, 2022.
  2. The IESO shall design, coordinate, deliver and fund programming targeted to residential consumers that is complementary to Enbridge Gas’ current residential natural gas demand-side management program, as initially approved by the OEB in its order dated November 15, 2022 for EB-2021-0002, and shall work to fully integrate the residential eDSM programming with future Enbridge Gas’ residential natural gas demand-side management program offerings as approved by the OEB. To implement this residential programming, the IESO shall:
    1. Make the programming available to all residential electricity consumers beginning in January 2025;
    2. Develop and publish the standard of service up to and including final incentive payment;
    3. Provide participants with a ‘one-window’ experience from program eligibility assessment and enrolment through to final payment of eligible incentives;
    4. Work with the OEB to implement one EM&V process for this programming. For certainty, the IESO is expected to lead the co-ordination of EM&V efforts with the OEB for the electricity program portion of the “one-window” approach; and,
    5. Negotiate and enter into cost-sharing and other agreements with Enbridge Gas in consideration of the requirements for the program and ensure that where appropriate, all eligible funding to the customer is provided in one combined payment for all the measures undertaken under the program.
  3. The IESO shall continuously improve and evolve these programs, as appropriate, in response to changes in consumer and electricity system needs, as well as expand demand response and distributed energy resources (“DERs”) program offerings. Programs will be described in the eDSM plan.

C. Business Programs

  1. The IESO shall continue to design, coordinate, deliver, and fund eDSM programs for consumers described in section A.3(b), including continuing existing programs initiated under the current 2021–2024 CDM Framework and outlined in the IESO's “2021-2024 Conservation and Demand Management Framework Program Plan” dated December 15, 2022.
  2. The IESO shall continuously improve and evolve business programs, as appropriate, in response to consumer and electricity system needs, as well as expand program offerings to demand response and DERs. Programs will be described in the eDSM plan.
  3. The IESO shall work to further integrate the business eDSM programs with current and future Enbridge Gas business natural gas demand side management program offerings.

D. Energy Affordability Program (Income-Qualified)

  1. The IESO shall continue to design, coordinate, deliver, and fund an income-qualified residential eDSM program, which provides different tiers of support based on income eligibility, with greater program benefits provided to low-income households, and continuously improve the program, as appropriate, to address consumer and electricity system needs.
  2. This program shall provide electricity savings measures to participants based on an assessment of needs and projected efficiency gains in the home.
  3. Despite this program not being required to meet cost-benefit benchmarks, the IESO shall nevertheless ensure that this program is designed and delivered as cost-effectively as possible and in a manner that results in impactful electricity bill savings for those most in need of support.

E. On-Reserve First Nation Programs

  1. The IESO shall design, coordinate, deliver, and fund eDSM programs targeted to on-reserve First Nation communities referred to in A.3(c), including continuing existing programs as appropriate, and continuously enhance programming to address community and electricity system needs.
  2. In designing, coordinating, and evaluating the performance of the delivery of eDSM programs for on-reserve First Nation communities, including any relevant income-qualified programs, the IESO will:
    1. Request the advice and consider the recommendations of First Nation communities and organizations, including in relation to program delivery; and,
    2. Seek and consider the input from the Ministry.
  3. Despite on-reserve First Nation programs not being required to meet cost-benefit benchmarks, the IESO shall nevertheless ensure that these programs are designed and delivered as cost-effectively as possible and in a manner that results in impactful electricity bill savings for participants.
  4. The IESO shall take steps to coordinate on-reserve First Nation eDSM programs with similar federal, provincial and entities delivering natural gas demand side management programs, including the IESO’s Indigenous Energy Support Programs.

F. Funding Program for LDCs

  1. The IESO shall create a program to:
    1. Fund LDC eDSM activities that raise awareness of and increase uptake of IESO-delivered, co-delivered or co-ordinated eDSM programs; and,
    2. Support and contribute to the funding of local eDSM programs that:
      1. Are designed and delivered by LDCs and endorsed by the IESO;
      2. Address local electricity distribution needs, and also provide value to the bulk electric system; and,
      3. Have received approval from the OEB for the rate-funded portion of the program costs.
  2. For programs described in section F.1(b), the IESO shall:
    1. Advise on and work with the OEB to determine appropriate cost-recovery and cost-sharing policy mechanisms for such programs, including participating in any related OEB proceedings;
    2. Provide endorsement to the OEB for such proposed programs that enhance or complement IESO eDSM programs in a manner that encourages innovation and interest by LDCs to design and deliver local eDSM programs. Endorsement and administrative requirements will be streamlined to provide flexibility for LDCs to design, deliver and administer local eDSM programs targeted to their customers that defer local distribution system capital investment;
    3. Conduct the EM&V for programs described in section F.1(b); and,
    4. Provide advice to the OEB on the administration of F.1(b), including but not limited to the use of cost-effectiveness tests, as outlined in the IESO “EM&V Protocol v4.0” dated February 2021 or as amended from time to time, and processes and the role of the IESO in local eDSM program evaluation, to assess cost-effectiveness of such eDSM programs.
  3. The IESO shall not enter into any agreements with LDCs in relation to programs described in section F.1(b) until the OEB has established an appropriate cost-recovery mechanism for such programs.

G. Definition of eDSM

  1. The IESO shall consider eDSM to be inclusive of activities aimed at reducing peak electricity demand and/or electricity consumption from the electricity system. Examples of eDSM include demand response, energy efficiency upgrades and process modifications whereby similar output is achieved with less electricity, behind-the-meter consumer generation and DERs such as solar photovoltaic and battery storage.
  2. For the purposes of the eDSM programs, the IESO shall consider eDSM to exclude:
    1. Those measures promoted through a different program or initiative undertaken by the Government of Ontario or the IESO; and
    2. Behind-the-meter consumer generation that uses fossil fuels purchased from or otherwise supplied by a third party as a primary fuel source.

H. Term and Budget

  1. The IESO shall make programs under the eDSM Framework available from January 1, 2025 to December 31, 2036 (“Term”), and no application to participate in eDSM programs shall be accepted or approved after the end of the Term, unless subject to necessary approvals, the Term is extended.
  2. The IESO shall not exceed a total budget of $10.9 billion for the Term and shall not exceed the sum of $3.2 billion for each three-year period covered under an eDSM plan.
  3. For each three-year period covered under an eDSM plan, the budget shall be allocated as follows:
    1. At least $200 million for eDSM programs described in section D;
    2. At least $27 million for eDSM programs described in section E;
    3. At least $90 million and no more than $150 million for the eDSM program described in section F;
    4. Up to 5% of the eDSM plan budget for central services costs and payments related to the programs under the eDSM Framework, which shall be inclusive of costs and payments for marketing, market research, EM&V, compliance, capacity building and information systems; and,
    5. The remaining budget shall be allocated to programs described in sections B and C.

I. Program Reviews and Studies

  1. The IESO shall complete a formal review of the eDSM Framework and submit a report to the Minister no later than July 1, 2030 that includes the following:
    1. An assessment of the alignment with system needs of the forecasted electricity and peak demand savings targets set out in the 2028-2030 eDSM plan;
    2. The alignment of actual eDSM program spending and the budget for the Term set out in section H.3;
    3. The alignment of the eDSM program offerings with consumer needs in Ontario and latest achievable potential study, and an assessment against programs from other jurisdictions;
    4. The progress and impact of eDSM programs, including separate metrics for income-qualified consumers and on-reserve First Nation consumers; and,
    5. Recommendations for the remainder of the Term, including whether the Term should be extended and whether the budget ceiling may need adjustment.
  2. The IESO shall conduct an achievable potential study or studies for eDSM as follows:
    1. The first study shall be completed by December 31, 2026;
    2. The second study shall be completed before the completion of the formal review described in section I.1; and,
    3. The third, and all subsequent studies, with potential extensions subject to appropriate approval, shall be completed no later than four years after the release of the previous study.
  3. The achievable potential studies described in section I.2 should, as far as is appropriate and reasonable having regard to the respective characteristics of the electricity and natural gas sectors, be coordinated with achievable potential studies or related research and analysis for natural gas efficiency conducted by the OEB.
  4. The IESO’s work on the achievable potential of DERs should align with the work of the OEB on the integration of DERs into distribution system planning and operations, as well as the use of DERs by distributors as non-wires solutions.

J. Reporting

  1. For each year during the Term, the IESO shall produce and publish annual reports on or before December 1 of the following year detailing the overall progress of the eDSM Framework, including where applicable, results related to funding leveraged from other sources, for the period of January 1 to December 31 of the previous year. In detailing the progress, reference shall be made to the reports of previous years.
  2. The IESO shall evaluate, for each year during the Term, incremental electricity savings and peak demand reductions achieved by the eDSM programs (including eDSM programs described in section F.1(b)) based on the IESO’s EM&V Protocol and requirements. These EM&V reports should be published on or before December 1 of the following year.
  3. The reports described in section J.1 and J.2 shall cover the same reporting period for actual achievements, to maintain consistency between the two reports.
  4. The IESO will regularly report achievements under the eDSM Framework to the Ministry, including:
    1. Quarterly, by each eDSM program and in aggregate, including but not limited to: participation, participant satisfaction, persisting and non-persisting electricity and peak demand savings, greenhouse gas (GHG) emissions reductions, as well as annual forecasted participation, electricity and peak demand savings and GHG emissions reductions over the 3-year planning cycle;
    2. Quarterly financial reporting, by each eDSM program and in aggregate, including, but not limited to: payments disbursed and costs committed in the previous quarter, and forecasted disbursements and commitments over the 3-year period covered by the relevant eDSM plan; and,
    3. Quarterly, or as appropriate, additional achievements for programs targeting income-qualified and on-reserve First Nation communities, including:
      1. Non-energy benefits, e.g., home safety and comfort;
      2. Province-wide and community coverage;
      3. Progress towards yearly enrolment targets; and,
      4. Participant satisfaction, where feasible.
  5. The IESO shall provide any other information as may be required by the Ministry from time to time or deemed relevant for reporting by the IESO.

Order in Council 1448/2024