Electricity local distribution companies (LDCs) are in the business of selling a reliable supply of electricity to customers. Offering conservation and demand management (CDM) programs to customers provides a number of benefits including:

  • Reducing electricity costs for customers,
  • Decreasing the strain on the grid at peak times of electricity use,
  • Delaying the need for new electricity generation infrastructure, and
  • Reducing the environmental impact of some forms of electricity generation (e.g. combusting fossil fuels to generate electricity).

Despite these benefits, CDM programs reduce the revenue of LDCs and this can be seen to be a disincentive for LDCs to offer CDM programs to customers.

The Ontario Energy Board (OEB) has provided a series of mechanisms to remove the disincentive for LDCs to offer CDM programs. Prior to 2011, LDCs could recover the lost revenue through the lost revenue adjustment mechanism (LRAM). Starting in 2011, LDCs can use a lost revenue adjustment mechanism variance account (LRAMVA) for lost revenue from CDM. LDCs recover the lost revenue through riders applied to customer rates.

“IndEco can assist LDCs to recover lost revenue from offering conservation programs to your customers using a process that is accurate and trouble-free

Since 2007, IndEco has worked with seventeen LDCs to help recover more than $10 million in lost revenues from offering CDM programs to customers. This includes close to $9 million through LRAM and $1.6 million through LRAMVA to date.

IndEco has developed comprehensive tools to assist LDCs with lost revenue estimation. The tools are designed to:

  • Properly assign the lost revenue to the appropriate rate class,
  • Accurately track lost revenue from persisting impacts of CDM,
  • Calculate carrying charges on the lost revenue,
  • Account for adjustments to previous annual CDM results,Photo of a calculator, some graphs on a page and coins.
  • Provide estimates for lost revenue for current and future years, and
  • Adjust for implicit and explicit impacts of CDM in an LDC’s load forecast.

We assist our clients with lost revenue estimation and provide clear reports outlining the calculation methodologies. IndEco’s methodologies conform to OEB requirements and we provide our clients with assistance through the OEB’s interrogatory process.

To find out more and see how IndEco could help your LDC recover lost revenue from CDM, please contact David Heeney.

Related information

IndEco Services: Regulatory affairs management
LDCs may get big lost revenue claims, even if behind on CDM targets