On June 30, the Ontario Energy Board released its Demand Side Management Guidelines for Natural Gas Utilities. Don’t let the dry name fool you – this is an important document.

Demand-side management (DSM) is another name for energy conservation, and these guidelines set the rules that will govern the development and delivery of conservation programs by Ontario’s major natural gas utilities (Enbridge and Union Gas) for the next three years. The rules for natural gas DSM have remained largely unchanged since 1993, with a limited reform in 2006. The development of the new DSM guidelines has been a lengthy three-year process.

With the wind-up of government conservation programs, gas utilities are now the major provider of conservation programs for natural gas consumers. I have previously reviewed the conservation achievements of the gas utilities between 2007 and 2009.

The most important element of the new DSM guidelines is the budget that will be available for utilities to spend on natural gas conservation initiatives. The Board has concluded that utility budgets will essentially be frozen at their current levels for the next three years. Enbridge and Union Gas together will be allowed to spend approximately $55 million annually on conservation programs for their customers. This amount is much less than the budgets that the Ontario Power Authority and electric utilities are spending on electricity conservation, despite the fact that the direct use of natural gas accounts for a larger share of Ontario’s total energy consumption (and greenhouse gas emissions) than does electricity.

My recent Annual Energy Conservation Progress Report – 2010 (Volume One): Managing a Complex Energy System discusses why I believe this decision to freeze natural gas utility conservation budgets will have a detrimental impact, reducing conservation investment in Ontario below societally optimal levels.

Other important issues addressed in the new DSM guidelines include:

• The types of conservation programs that utilities will be enabled to deliver (including programs for low-income consumers);
• How program success will be measured and how utilities will be rewarded for success;
• Whether the benefits of reduced greenhouse gas emissions should be a factor in determining which programs utilities deliver.

The next step in natural gas conservation is for utilities to submit their three-year DSM plans (2012-2014) to the Board by September 15, 2011. These plans will allow us to see whether the new DSM guidelines have led to major changes in the conservation programs that utilities will offer to their customers. Look for my review of the new DSM guidelines in more detail in a future report.