Be skeptical of silver bullets, political experts agree
In the wake of the 2015 federal election and with majority Liberal governments in power nationally and in many provinces, the likelihood of large-scale political initiatives in the energy sector has risen dramatically. Yet governments should be leery about promising sweeping new undertakings in the power sector – neither the prognosis nor the track record for grand schemes are grounds for optimism. Despite a range of differences, speakers on the Political Issues Panel at the APPrO 2015 conference recommend modesty when considering new initiatives, and skeptical assessment of political propositions that appear to offer “silver bullets.”
Moderator Sean Conway of Gowling, Lafleur Henderson LLP and the Centre for Urban Energy at Ryerson University kicked off the discussion with a question to all the panelists on the impact of the new national government in the areas of energy and the environment.
Will Stewart of Navigator Limited responded first by saying that he believes that the emphasis that the new Liberal government will put on green energy has been heavily influenced by the political staffers who carry with them the Ontario experience of green energy policy. He hopes that it won’t result in federal initiatives as extensive and perhaps as misguided as what has happened in Ontario. The rejection of the Keystone pipeline and the uncertainty over the Northern Gateway pipeline are indications of a poor prognosis for economic development in the energy sector which in turn spells trouble for the larger economy of Canada. Further evidence of difficult conditions ahead can be seen in the significant decrease in oil prices, an NDP government in Alberta that is looking at royalty reviews, layoffs at Enbridge, and tens of thousands of jobs being lost since the NDP took power in Alberta.
“We’re about to embark on what can only be called a first Minister’s conference in Paris, as each of the Premiers and the new Prime Minster head overseas to discuss global warming, greenhouse gas emissions, and perhaps a new international agreement on that. That’s obviously going to disproportionately affect people in the electricity sector and people in the oil sands.”
Sun National Columnist Tom Parkin, suggested that the Liberal government’s emphasis on infrastructure will prove to be an important political development for people in the energy sector. The Parliamentary Budget Office has published economic projections less optimistic than had been expected earlier in the year. This lower growth means lower revenue for the government and will create problems for Prime Minister Trudeau who already had a problem keeping his projected deficit to $10 billion.
Key determinants will flow from the climate positions taken by the Premiers. There’s a lot of forward movement on developing a national system that will meet climate change targets - but a lot of uncertainty on the shape it will take.
Rob Silver of Crestview Strategy noted that Minister James Carr (Canada’s new Minister of Natural Resources) has instructions from Prime Minister Trudeau, expressed in the official mandate letter, to be directly engaged in the Canadian Energy Strategy initiative.
Moderator Sean Conway moved the conversation to the international level by referring to the G20 meeting in Turkey where government leaders from the United States, the United Kingdom and Canada all talked about the road to COP21 in Paris. Conway made the point that there seems to be growing momentum among world leaders that something has to be done about the challenge of climate change. He tied this observation back to the earlier presentation where Greg Lyle made the point that good dialogue and good policy are critical to bringing the consumer along to a better understanding of what needs to be done and why. Conway asked the panel to comment on the following: If you can’t do the things you need to do to mitigate climate change without adverse effects on energy prices, what specific advice would this panel have for this audience ? How should a group like this audience prepare for what’s to come on this climate change issue?”
For Parkin, the on-going problem in the sector is rising energy prices. However that is not all the fault of the sector. The anger and related issues that Lyle didn’t speak about stem from things like the gas plant scandal and revelations about government policy over the last 10 years indicating that billions of dollars have been wasted. Eighty percent of the population doesn’t support the [Hydro One] privatization plan and 185 municipalities passed motions against it. “It’s critical that the people in this room take hold of your shared agenda and make sure that there’s something sustainable and something you can push forward on that’s going to last longer than the next election. Because if we can get rid of all that corrosive style, then maybe the price increases which are now built in and virtually unavoidable, can be managed a little better.”
Will Stewart sees a unique opportunity right now. Based on the results of focus group research by Navigator in the 24 hours after the election they found that in general Canadians were happy they voted for Trudeau but weren’t very knowledgeable on the details of his policies. This gives Trudeau an opportunity to alter the promises that were made in the campaign platform without being penalized by Canadians. “As long as his approach to those decisions, his tone, his civility, and his inclusiveness remains the same, he almost has a free hand on policy.”
What that means for this industry is that there’s a great deal of opportunity for advocacy by the industry to try to help shape these policies and to not just sit back and complain about what the government’s going to do based on their campaign document. In Ontario, you’ve already got the public being quite upset about what this government is doing on energy policy and the privatization of Hydro One. The industry can use that opening to their advantage to try to impact other policy areas so the Premiers can save some face and get some political credit back in the energy sector.
Moderator Sean Conway then turned the conversation to the question of our relationship with the Americans. “What are the lessons to be learned in government and business relations from the Keystone experience and what advice would you give based on that experience?”
The Conservative partisan answer, presented by Will Stewart, is that Stephen Harper said it well in the foreign affairs debate: if you want to hurt relations with the U.S., you announce at the beginning of your mandate that you’re pulling out of bombing missions against ISIS. Keystone was cancelled shortly thereafter. The strategic answer is that everyone knew that keystone was going to be cancelled anyway. You have a President at the end of his term who is searching for legacy, probably somewhere in the environmental area. President Obama rightfully didn’t want to interfere with the Canadian election. Of course there’s also a subplot to that. There is a massive and regular influence of the Obama democrats on the Liberal election machine in this country. The real change, the positive attitudes, the “sunny ways” can all be linked back to how Obama won in his first term. Stewart predicted the relationship between Trudeau and Obama will be fantastic because they have so many friends in common.
Mr. Parkin started by saying that Harper calling the Keystone pipeline a ‘no brainer’ was not the best move he ever made for Canada. In the U.S., Keystone is far more of an environmental issue since it is seen as dirty Canadian oil. In Canada, it’s a job issue because of where the refining can happen. There’s an environmental impact (in Canada) but it’s about development and a value added industry. Though, it could be debated whether it’s a good or bad plan to create wealth.
Another lesson to be learned, Parkin noted, is in engagement. “When people see their laws on environmental assessment are being peeled back, they no longer have the ability to go to the National Energy Board with depositions that are actually heard or make any sense and matter, then nobody believes in the process anymore. Once that happens, exactly what did happen will happen.”
With respect to the organization of the electricity sector, the OEB, the IESO, the planning and regulatory review, and the concentration of power in the Ministry office, Parkin does not see these as good things because decisions get made by people for the wrong reasons. “There are some very knowledgeable people in this room, and we need to treat the energy planning in an open way by following the people who can put the science in front of us.”
Mr. Conway relayed a question from the audience: “How can we improve inter-provincial electricity trade in this part of the country to better harness green energy, including the hydro capacity in Canada, across interprovincial boundaries? Taking into account the Obama Clean Energy Plan that has specific mandates of what has to be taken out of production?”
Will Stewart could not see a case, now or in previous panels, for major investment in new facilities for east-west transmission of electricity. One reason is the changeability of the relationships between the provinces and their Premiers. Using Ontario and Quebec as an example, Couillard and Wynne work well together but while there was a PQ government in power in Quebec those kinds of discussions were always going to be difficult. Secondly, the economics are difficult. Transmission lines can be looked at as either a twenty year or a hundred year investment. If it’s a 100 years the economics are very different from twenty years though there are reasons to evaluate it both ways. The economics don’t work, and the Duty to Consult legislation from the Supreme Court would not allow it to work.
Mr. Stewart said, “Certainly from the days when [Sean Conway] was critic to the Minister I worked for in energy yelling across the aisle in the legislature about why we were bringing in waterpower from Northern Manitoba through First Nations territory and down into Sudbury, we thought it was a crazy idea. And I don’t have any information that it isn’t a crazy idea now. If there is a business case for it, if there is a political case for it, if there is a social case for it, I don’t know what it is. The case from those who say we need an east-west electricity grid has certainly not been made to the political folks who make those actual decisions. And while we make more money shipping it south than we do east or west, I don’t see it happening.”
Tom Parkin questioned how Ontario could be providing power to other jurisdictions when we’re having a difficult time trying to keep our prices attractive to ourselves.
A member of the audience asked “Considering that the provinces have jurisdiction over electricity and municipalities, and Ottawa has infrastructure money and wants to lead the climate change agenda, how do we align those two realities? Can we get sufficient federal/provincial coordination to electrify transportation, or will we miss that opportunity because we won’t be able to work out the endless provincial/federal tensions in the Canadian Federal state?”
Tom Parkin disputed whether or not the Federal Government does want to show leadership on climate change given that the targets are no different than the previous government’s going to the Climate Change Conference. He believes that in many ways it’s about showing a difference in style and the Prime Minister showing that the Premiers are together and that they are consulting. Currently the structure around climate change is a decentralized, federalized approach. In the election campaign we saw four very distinct approaches put forward, including the Green Party. They were approaches that would have a national cap and trade, there was the Liberal approach that would not have a national leadership program and would leave it to the provinces. Mr. Parkin questioned what would happen if all the Premiers did not agree. “If Premier Notley is doing something, Premier Wynne is doing something, Premier Couillard is doing something, and Premier Clark is doing something, why aren’t you doing something other Premier? At that point, perhaps the weapons come out a little bit and life might get a little tougher for Mr. Trudeau.”
On infrastructure, Parkin used the Toronto subways and the Union-Pearson Express as examples of the political interference that has led to waste because we’re allowing short term political actors to make specific choices between infrastructure options. “They’re making them because a by-election or an election is coming and that is not the way we can go forward. National programs can help ensure that that kind of corrosive behaviour is driven out of the system and that federal infrastructure money goes to initiatives that are proven to reduce the carbon imprint.”
Mr. Conway asked the question, “How can we align federal interest, capacity, and money with provincial responsibilities to actually move things forward to take some of the pressure off aggrieved taxpayers, energy consumers and citizens? Particularly in an urban environment where they feel they can’t hardly turn around for congestion?”
Will Stewart pointed out that Kathleen Wynne was Justin Trudeau’s campaigner in chief and that will bode well for their relationship moving forward even as she is pushing hard to see a cap and trade system that she designed implemented across the country. Stewart pointed out there are several ways Trudeau could have shown leadership on the international stage, by setting up targets and letting the provinces design their programs to implement them for example. But Stewart focused on the fact that we can talk about infrastructure dollars and electrification of the GO trains but that Ontario needs a reality check given that the province has lost hundreds of thousands of jobs that aren’t coming back and there is a government in power that continues to spend beyond its means and comes up with new revenue measures (i.e. taxes) to pay for that spending.
“Electricity prices are already going through the roof, green energy prices are going to kick in, the ten percent Clean Energy Benefit is coming off our electricity bills and we’re going to now add a higher price of electricity with some type of cap and trade scheme which will bring in billions of dollars in new revenue. Metrolinx doesn’t tell us how much things are going to cost. The Ontario Government doesn’t tell us how much things are going to cost. They don’t tell us how much money is going to come out of the economy for a cap and trade scheme. They tried to hide the gas plants. There are billions and billions of dollars we’re talking about here. All for things that don’t do much to get this province back on its feet. That’s what we need to focus on.”
Sean Conway added a new element by bringing the insurance industry into the conversation. “Citibank is saying officially that it will not be funding new coal fired plants in the United States. Three weeks ago in London, Mark Carney, The governor of the Bank of England, made a speech about the growing risks associated with the use of carbon to move people around and to generate electricity. Should we be concerned that bankers and insurance people are saying that there is a growing cost to continue to do business as usual and to not be de-carbonizing and that they’re now going to start assessing that cost whether through your insurance premiums or in other ways?”
Will Stewart said there’s going to be costs for climate change and we should be doing everything possible to try to mitigate those costs and the effects on our planet. The challenge is how much more can the voter, the taxpayer, and the ratepayers of Ontario absorb? “We talk about trying to catch up to California and Quebec on a cap and trade system. They designed their cap and trade system over five or six years. This government seems to think they can get it done in less than twelve months.”
Mr. Conway asked how an NDP Government could have been elected in Alberta, but Mr. Parkin addressed the insurance question first: Insurance companies see costs and they try to get our governments to attack those costs on their behalf but also on our behalf. The problem with costs in the public sector is that when the corrosive political aspect digs in and you don’t see due process, respect for the government or the decision making process, then things fall apart and people do not believe what they are being told about climate change or the price of electricity.
Parkin described the recent election in Alberta as an explosion, where the NDP went from being the fourth party to gaining over fifty seats. He again pointed to corrosive politics where the PCs had been in power for a long time and were adding new taxes and were not going to increase corporate taxes even though the corporations were part of the reason that Alberta was in such a rough situation in the first place. A similar thing happened when the Federal Liberals came from nowhere to 184 seats. It is difficult to understand the dynamics and he cautions Ms. Wynne to be wary because something similar could occur in Ontario. A recent Angus Reid poll showed that 70 percent of people want change in the Ontario Government. “People in the energy industry need to keep an eye on the future because come the next Ontario election, anybody could be in power. Each one of the parties is going to have a plan in place to show that they can manage the sector and that’s something that the energy sector should be engaged in.”
Mr. Conway put an additional question to the panelists. “What should we make of these warnings that these financial realities like increased insurance costs and other issues having to do with traditional fossil fuel energy resources are going to be more a part of our future?”
Will Stewart pointed out that Mr. Silver didn’t like comparisons across Canada on previous panels when Ontario was the caboose of economic train in Canada. But when the oil price collapses, the NDP takes over Alberta and the economy tanks, Ontario doesn’t look so bad. Mr. Parkin questioned Mr. Stewart’s suggestion that the economic downturn in Alberta was caused by the NDP.
Referring to the increased engagement of young people in the recent election campaign, Mr. Conway posed a question from an audience member: “We’ve been encouraged as young people to make a contribution to the new policy agenda. What advice would you and the panel have for young people looking at getting involved, particularly with respect to the issues of climate change, energy and the environment?”
Tom Parkin agreed that young people have a huge interest in policy and politics, using his three teenagers as an example and saying that the way they think isn’t dramatically different from how his generation thinks. He provides the caveat that they do believe that his generation may not have been running associations and political parties as well as they could and that they see the consequences flowing down to them. “There’s a seed of resentment there and it would be hard not to have it because they are being left with a socio, economic and environmental debt that we are now struggling to deal with.” A way of showing faith with them would be to take on climate change but he cautions that we also have to consider the finances because taking on climate change, changing the electrical system and transit systems, and getting off coal, all cost money. We owe it to ourselves, and to them, to show that we’re spending money wisely. He added that we need to harness the passion of the younger generation since they are bright and they’ll be up on the stage in ten years.
Will Stewart went further, saying he takes a more practical approach. Parents need to talk to their kids about what they believe in, about what the parents believe in and what the kids believe in. Kids need to watch and read the news, even though there are bad things in the news, to get them hooked into public affairs.
In terms of young people getting involved, Mr. Stewart said he hesitates when people ask how to get involved in policy making on global warming or electricity policy. His simple answer is you show up. You go to the conventions even if you’re not a partisan. You talk to politicians. Read about things, formulate your opinion and then talk to other people, not necessarily politicians, about your opinions. Public debate does not just happen with politicians. You can have a distaste for partisan politics, and many people do, but if you want to be at the table with a Cabinet Minister deciding on cap and trade policy you have to be engaged in partisan politics in some respect.
Mr. Stewart, who has been involved in numerous local campaigns, goes further to say that if you want to get involved, volunteering at your local organization is a good place to start. But don’t expect to be sitting down at the policy table with a Cabinet Minister right away. “The best job to have on a local campaign is going door knocking with the candidate. That’s how you get face time. It’s not about sitting around a board room table and pontificating. “
Mr. Conway brought the conversation back to whether Ontario has the right planning process for energy resources. “We’ve got two new bills in front of the legislature. Bill 112 which touches on the mandate of the Ontario Energy Board and by my reading expands the mandate of the OEB in some respects. And then we’ve got Bill 135, which certainly seems to constrain the role of the Energy Board. Does most of the planning ultimately belong to the government or is it the government’s job to announce the general direction and turn to independent experts to actually put flesh on those bones?”
Mr. Stewart said the process is getting worse because Bill 135 makes more decisions secret and the frequent issuing of Ministerial directives is undermining the operation of the Ontario Energy Board. “You can expand the mandate of the OEB all you want but if you allow Liberal Cabinet Ministers to issue Ministerial Directives as often as some people change their socks it doesn’t matter.” In addition, the government is making decisions on the IPSP in secret, so that even though it was developed by technocrats with experience in the industry, the politicians are still making those decisions. He doesn’t see any changes in the process while the current majority government is in power.
Mr. Parkin shared Mr. Stewart’s concerns saying that Bill 112 means that power transmission projects can bypass the OEB, and Bill 135 means that the planning process will essentially be an autocratic, black box process. He noted that provisions related to consultation in Bill 135 don’t reflect the transparency that the Minister of Energy promised. The energy sector is a very political environment and Parkin used slot machines at a casino analogy to illustrate his point. The reason slot machines are so addictive is because you never know when it’s going to pay off. So you keep putting money in because it’s going to pay off big at some point if you stay there. The problem with the existing process is that developers don’t know what the system is going to get them and whether this time it’s going to work out. It’s a very corrosive, expensive system that lends itself to political tweaking. He stressed that everybody in the room and the electricity sector as a whole, has a very strong interest in fixing this broken system. It is up to the electricity sector to present to politicians a picture of a system that makes sense, is defensible with a decent rate of return for private business, and convince them that they’re supplying something incredibly valuable to society. The ratepayer has to be key. Advocating for the industry is something you have to embrace because nobody else is going to do it for you. By making your case, you can move away from the weight you carry from the poor decisions made by this government.
For the final question, Mr. Conway asked for the one thing each of the panelists would recommend the government do to improve conditions for the consumer of energy services.
Mr. Parkin enumerated the upcoming changes to electricity bills as of January 1: the addition of the Ontario Energy Support Program, the removal of the Debt Retirement Charge, and the removal of the Clean Energy Benefit, which will result in a net negative impact on consumers. He added a sidebar, that the Clean Energy Benefit was a particularly corrosive political manoeuvre that was paid for by taxpayers but had nothing to do with clean energy and that that type of manoeuvre hurts the government in the long run once consumers figure out what is going on.
He questioned the value of the Ontario Energy Support Program that begins in January, given that a family of four has to have an income below $39,000 to qualify for the support. “That’s pretty poor. Especially in this town so I question where the benefit is. Unless it’s that you get radio ads that tell people their electricity bill might be going down but they don’t tell them they have to earn $39,000 or less to qualify.”
Mr. Stewart had the final word of the day for the government. “Stop making bad decisions in the electricity sector where prices are already going up. Don’t exacerbate that problem.”
The above report was prepared by Colleen Winter, a writer specializing in the Ontario electricity sector. Editing by Steve Kishewitsch and Jake Brooks.