September 27, 2004

Competition could drive innovation in energy efficiency, says Direct Energy president

Energy conservation measures in Ontario would be best placed in the hands of energy retailers and other competitive entities, and Bill 100, the government's proposed electricity sector restructuring legislation, could present an opportunity to bring competition-driven efficiency and innovation to the delivery of electricity conservation and demand response in Ontario, Paul Massara, president of Canadian operations for Direct Energy Essential Home Services, told the recent Ontario Energy Association (OEA) annual conference in Niagara Falls.

"It is very difficult to deliver innovation through bureaucratic structures," he said. "Competitive entities, acting under ordinary commercial incentives, are better placed than central government or regulated institutions to deliver the benefits of technological innovation, while assuming and managing risk."

In the United Kingdom, Massara continued, the Utilities Act provides statutory authority for government regulation of energy conservation. The government has made an "Energy Efficiency Obligation Order" which requires energy suppliers like Direct Energy's parent company, Centrica, to fulfill specified energy efficiency obligations as part of their licence terms and conditions.

"Through this Order," he explained, "the regulator allocates total energy efficiency targets across suppliers, and each supplier designs and delivers programs that achieve their allocated energy savings target." The regulator publishes approved efficiency measures and suppliers design their programs around these measures.

Massara suggested that the new Ontario Power Authority develop a menu of energy efficiency interventions, each with a pre-specified deemed efficiency gain and a pre-specified incentive entitlement. For example, upgrading air conditioner efficiency would be deemed, based on average usage assumptions, to result in a certain efficiency improvement, and be eligible for a predetermined incentive payment. Upgrading insulation would be deemed to produce a certain efficiency improvement, and be eligible for a predetermined incentive payment. This approach has been taken in the U.K.'s Energy Efficiency Commitment program, with some success.

Direct Energy is currently developing a proposed framework for a conservation program. "We look forward to sharing further details with government and interested stakeholders in the coming months," Massara concluded.

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