Applying the Total Resource Cost Test to Conservation and Demand Management Initiatives of Local Electricity Distribution Companies in Ontario: Assessment and Recommendations for Reform

This study has its origins in my participation in the Ontario Power Authority’s Conservation and Demand Management Program Development Advisory Committee in 2006 and 2007 while serving as a Program Director with the Pembina Institute. In discussions with local electricity distribution company (LDC) staff involved in conservation and demand management (CDM) activities that served on the committee, one of the issues raised was the role of the Total Resource Cost (TRC) test in the evaluation of proposed CDM initiatives. It became apparent that the test was perceived as a significant barrier to CDM program innovation, development and delivery.

The opportunity to investigate the role of the TRC test in local utility electricity conservation and demand management activities more formally arose as a result of discussions between the Electricity Distributors Association (EDA), the York University Foundation and the Faculty of Environmental Studies. Through the LDC Future Fund the EDA kindly provided a grant for a study of the impact of the TRC test on local utility CDM initiatives.

The resulting study, presented here, recognizes the value of the TRC test in program design and evaluation. At the same time, the study identifies a number of areas where specific modifications and adjustments to the TRC test as currently applied by the Ontario Power Authority (OPA) and Ontario Energy Board (OEB) to LDC proposals for CDM initiatives could be made to encourage and facilitate such activities. More broadly, the study concludes that the most important barriers to LDC-led CDM initiatives do not lie with the TRC test and its application by the OEB and OPA per se. Rather the study finds that the most significant barriers relate to the wider regulatory and institutional framework for electricity CDM within which LDC initiatives occur and the test is applied. These types of barriers are the focus of the recommendations made here.