NOTL Hydro Board Critique: Cancel $2 Billion CDM Programs

May 1, 2017

Need to Start Removing Costs from the Ontario Electricity System Now

May 1, 2017, Niagara-on-the-Lake – The Board of Niagara-on-the-Lake Hydro (NOTL Hydro) urges the Minister of Energy to cancel the existing Conservation and Demand Management (CDM) programs and save electricity consumers over $400 million a year.  The current 2015-2020 program has a budget of over $2 billion.

“We applaud the Government for announcing the end of offering high priced FIT and MicroFIT contracts and for providing rate relief for most consumers,” said Jim Ryan, Chair of NOTL Hydro, “but until we take actual costs out of the system we are just moving money around.  The CDM programs no longer meet the purpose for which they were created and are the biggest expense item that can be cut immediately.”

The theory behind CDM programs is that it is less expensive to reduce the peak demand for electricity than to build and operate the new generation that would otherwise be needed.  CDM programs were pioneered in California in the 1970’s during a time of rapid growth in electricity usage when the alternative was building new nuclear power plants.  Ontario is not currently in a similar situation:

  • Consumption of electricity is down over 10% since 2005 and is not rising.  While some of this decline is due to the CDM programs most is due to changing industrial demand and natural efficiencies;
  • Ontario has an electricity surplus and is losing money on its exports of excess electricity.  Declining demand for electricity in Ontario will make this worse.
  • Many of the CDM programs, such as paying to convert streetlights to LED lighting, do nothing to reduce peak demand.  The Environmental Commissioner of Ontario has noted this.
  • The Government has already committed to the refurbishment of the Darlington Nuclear plant.  The CDM program has not helped avoid this expensive undertaking.
  • Over one-third of the CDM target could still be achieved by improved codes and standards which do not encumber electricity consumers with the costs of program subsidies.
  • CDM costs are part of the Global Adjustment.  Eliminating these costs would reduce the Global Adjustment.

According to the Board of NOTL Hydro, it is about setting priorities and right now, creating a culture of cost management in the Ontario electricity industry is more important.  The current high prices will ensure a culture of conservation continues to be vibrant even without the CDM program expenditures.

The Board of NOTL Hydro has previously urged the Minister and the Premier to take steps to reduce the high cost of electricity in Ontario and has provided concrete suggestions.