Union Gas Proposes DSM Plan for Large-Volume Customers

October 2012

• Union Gas is seeking Ontario Energy Board approval of a demand-side management (DSM) plan for 2013-2014 for its current T1 and Rate 100 customers. The proposed plan assumes OEB approval of the split of the T1 group into two - new T1 and new T2 - as requested by Union in its 2013 rate proceeding. The OEB approved the split on October 25.
• For customers in the new T2 and the Rate 100 groups, Union has put forward a “direct access” mechanism so customers will have dedicated access to the customer incentive amount they pay in their rates. The access would be subject to certain requirements and conditions.
• Although some customers have indicated to Union they would like there to be an opt-out option for Union’s DSM program, Union has indicated it does not support such a provision and is not proposing one.

Union Gas has filed an application with the Ontario Energy Board requesting approval of a demand-side management (DSM) plan for its large-volume commercial, industrial and power contract customers. The plan covers the years 2013 and 2014, and is focused on customers in Union’s current T1 group in the South and Rate 100 in the North and East. The plan responds to a commitment that Union made in a previous DSM proceeding. Union indicates in its filing that consultation sessions with customers and other stakeholders helped to shape the program proposals. The proposed DSM plan assumes the split of T1 into two as requested by Union in its 2013 rate proceeding.

In its rate filing for 2013, Union requested that the existing T1 group be split in two – a new T1 class and a new T2 group - effective the start of 2013. The OEB approved the split in its decision dated October 25. The new T1 will include customers with a firm daily contract demand up to 140,870 m³/day and a qualifying annual transportation volume for combined firm and interruptible service of 2,500,000 m³ or greater. The new T2 will include those with a firm daily contract demand of at least 140,870 m³/day.

DSM Offerings and Incentive Budget Mechanisms

The DSM program offerings that are proposed for 2013 and 2014 are similar to those that were approved for Union’s 2012 plan. They are:

• customer engagement (communication and education) to increase awareness of energy efficiency opportunities and benefits,
• engineering feasibility and process improvement studies to identify and quantify potential energy savings measures,
• financial incentives to support operation and maintenance practices geared to saving natural gas and increasing energy efficiency as well as improving productivity of operations,
• financial incentives to support the installation of new equipment and processes focused on saving natural gas, and
• financial incentives to support the installation of energy meters, monitoring and management systems so customers can actively manage the energy intensity of their operations on an ongoing basis.

Union points out that the DSM program offerings in the plan are to be delivered annually over the two years of the plan, and that the offerings could change if market conditions change.

The T1/T2/Rate 100 program budgets for 2013 and 2014 are about $4.8 million and $4.9 million, respectively, including an amount for inflation but excluding required allocations for Union’s overall portfolio budget and the low-income budget. Union is proposing two budget mechanisms for customers in the affected rate groups to access the incentive funding. For customers in the new T1 group, an “aggregated pool” approach to disbursing the incentive budget is contemplated for projects that are supported based on natural gas savings and cost-effectiveness. This is consistent with the approach being used for 2012.

For the new T2 group and the Rate 100 group, Union is proposing a “direct access” approach whereby each T2 and Rate 100 customer will have dedicated access to the customer incentive amount they pay in their rates. Union explains that under this mechanism, each customer will know how much funding they have available each year to undertake initiatives to reduce the energy usage in their facility.

Union has also separated the direct access mechanism into two distinct time periods. From January 1 to August 1 of each year, each T2 and Rate 100 customer will have direct access to the incentive amounts they have contributed via rates. By April 1, customers will be required to submit an energy efficiency plan, developed with the assistance of Union and intended to guide customers and Union in their DSM work together. Until August 1, customers can either receive an incentive for an energy efficiency project or earmark funds for projects with completion dates post-August 1 and up to December 31 of the year in question. In order to have a project earmarked for direct access funding, Union must have received documentation from the customer that is acceptable to Union and that includes a description of the project as well as a commitment with respect to the in-service date for the project. After August 1, any direct access funds not used or earmarked will be made available to all customers within the rate group. Such funds will be disbursed through an aggregated pool approach.

No Opt-Out Provision

Some large-volume customers have indicated to Union that they would like the option to opt out of the utility’s DSM program. This means there would be no DSM program costs in their delivery rates and they would avoid the impacts of Union’s annual clearance of amounts in its DSM-related deferral accounts.

As summarized by Union, the reasons for these customers wanting an opt-out provision are: there are no further DSM opportunities, DSM projects are being implemented by the customer and no utility funding is needed, and the clearance of DSM-related deferral account balances has resulted in significant out-of-period adjustments.  

Union does not support an opt-out provision and so is not proposing one. Union says such an option would run contrary to the established principles of class ratemaking. Union also maintains the proposed T1/T2/Rate 100 program addresses many of the concerns that have been raised regarding DSM offerings for these customers without the need for an opt-out option.

The utility’s application indicates that based on its 2013 rates filing (pre-OEB decision), the average DSM component of rates is about 0.33 ¢/m³ for the new T1 group, 0.06 ¢/m³ for new T2, and 0.0.09 ¢/m³ for Rate 100.  As a percentage of the total average distribution rate for each class, the DSM component represents about 17% for T1, 6% for T2, and 11% for Rate 100.

Next Steps

The OEB has initiated its review of Union’s application with a written question and answer phase, completed on October 25. Further steps are anticipated but have not been announced.

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