Ontario Canada Electricity Task Force issues formal recommendations

Cites Electric City Corp. technology as a model case study of demand side management and conservation

ELK GROVE VILLAGE, Ill. and TORONTO, Jan. 15, 2004 — Electric City Corp., a developer, manufacturer and integrator of energy savings technologies and negative power systems, announced that the Electricity and Supply Task Force appointed by the Government of Ontario formally presented its report to Dwight Duncan, Minister of Energy for the Province of Ontario recently.

The Task Force cited Electric City’s ComEd 50MW power curtailment system as a model example of a real-time, verifiable, demand response program that can be readily developed in the Ontario market.

The Electricity Conservation and Supply Task Force was established in June 2003 to develop an action plan for attracting new generation, promoting conservation and enhancing the reliability of the transmission grid in order to meet the future energy needs of Ontario as the Province faces a looming electricity supply shortfall.

The full report can be downloaded from the Government’s official website at .

Ontario’s thriving economy and growing population base have meant constant growth in the need for electricity. The Ontario Independent Market Operator (IMO) future medium growth projection shows that annual peak demand in Ontario will rise from just over 24,000 MW in 2004 to over 30,000 MW (including reserve requirements) in 2013 and that Ontario would require nearly 37,000 MW of capacity by 2020.

The Ontario Government has committed to conservation gains equal to 5% of peak energy demand over the next 4 years. This demand reduction program could eliminate up to 1350 MW of peak demand over that time period. In addition, the Task Force presented specific conservation recommendations, which include the adoption of market rules that allow demand reduction the ability to compete head to head on a level playing field with supply side alternatives.

The Task Force determined that Demand Response could lower system load when the supply demand balance is tight, thereby, helping to moderate energy prices. The Task Force agreed that programs need to exist that allow verifiable, dispatchable load to be traded equitably with generation and to be compensated in a similar way.

“We are very proud to have been asked to participate and to have our VNPP® be cited as a strong model for market-based, demand response by the Ontario Task Force,” stated John Mitola, CEO of Electric City Corp. “We applaud the recommendations of the Task Force. Residents of Ontario and parts of Eastern United States found themselves in the dark on August 14, 2003 – realizing first hand the importance of a sustainable and reliable transmission and distribution system. This report is as much a watershed event to Electric City and the energy industry as was the August 14th blackout.
The report clearly identifies demand side management as an important and necessary tool for a sustainable reliable and efficient future electricity transmission grid. This is an example of rulemaking taking place across North America that is creating a long-term market for demand response, and, we are ready with our VNPP® system.”

The Task Force consisted of nineteen leaders from all parts of the Canadian electricity industry, including representatives of consumers, workers and environmental groups. The Task Force heard presentations from nearly 100 experts representing different companies and stakeholder organizations.

Recent U.S. studies have estimated that a 2% to 5% reduction in demand on days when peaking generation would otherwise be needed can reduce prices by as much as 50%. The U.S. National Association of Regulated Utility Commissioners has estimated that up to 40% to 50% of peak load growth over the next 20 years could be met by energy efficiency, price-responsive demand reduction and load management.

“Given our lower cost and operating advantages to develop and deploy our Virtual ‘Negawatt’ Power Plan (VNPP®) demand reduction system when compared to peak supply generation, we are very excited about the ability to compete head to head in the Ontario wholesale power market. With a level playing field established, we anticipate that a future VNPP program in the Ontario market could exceed 250 MWs. These rules will allow Electric City to sell negative power into the wholesale market in the same manner as a power supply generator.”

“Ever since we launched our 50MW project with ComEd, we have continued to explain to utilities, regulators and our investors that the energy marketplace is transforming very quickly to allow dispatchable, verifiable, real-time, demand reduction to trade at par to supply in the wholesale power markets. This transformation must occur because electricity peak demand continues to grow, load factors continue to deteriorate and the industry simply can’t continue to build more generation, transmission and distribution to serve such severe operating conditions. This macro-economic tension was clearly demonstrated on August 14th. Ontario’s Electricity Conservation and Supply Task Force has once again endorsed this new vision for the energy industry. We are very excited about the future of Electric City’s ability to compete in a open and competitive wholesale power market in Ontario and in other market regions,” stated Mr. Mitola.

Ontario is facing significant shortfalls of generation to meet the future demand of the Province. It is estimated that by 2020 virtually all of the Province’s existing nuclear plants will reach the end of their planned operating lives and will need to be refurbished, replaced, or retired. In addition, the Government is committed to eliminate all coal fired generation by 2007. Coal currently represents 26% of the Province’s generating capacity. The IMO projects a shortfall in 2007 of up to 7000 MW of built out capacity.

“The Ontario report is a direct example of our continued progress on our business plan and specifically, the results of our regulatory efforts,” added Anna Baluyot, Electric City’s Vice President of Utility Development. “Since we launched our ComEd VNPP® and since the August 14th blackout, we have been very active with utility development and with regulatory initiatives aimed at rulemaking like those in the Ontario report. Our efforts are part of a very methodical plan to combine our customer base and initial utility projects with a regulatory strategy designed to enable significant growth in our VNPP® developments and demand trading. This is our plan to establish VNPP® systems across North America and to generate strong, long-term, residual cash flows out of this new vision for the energy industry and specifically, demand trading/negative power.”

About Electric City Corp.

Electric City® is a developer, manufacturer and integrator of energy savings technologies and building automation systems. The Company currently markets the EnergySaver(TM), the GlobalCommander® and LightMaster(TM) energy conservation technologies, as well as its independent development of scalable, negative power systems under the trade name, Virtual “Negawatt” Power Plan “VNPP”®. The Company recently announced its first VNPP development — a 50 Megawatt, negative power system for ComEd in Northern Illinois. Electric City® is based in Elk Grove Village, Illinois and is traded on The American Stock Exchange under the symbol ELC. Additional information is available at the Company’s website at or by calling 847-437-1666.