The McGuinty government has become known for thinking long term, for trying to ensure that the full range of consequences is considered when building public policy. Although there have been some exceptions, this approach is commendable, and should arguably be the first and most important priority for decision-makers, especially early in a government’s term of office.
Continuing in the same vein, Ontario’s Minister of Energy, Brad Duguid, announced in September that the government was starting a new process called LTEP, or the Long-Term Energy Plan, and would be seeking input from the public, industry and a wide range of stakeholders – all of which are sound and reasonable ideas. What surprised many is that there was little indication of how the new LTEP would fit with the carefully-designed and almost complete planning process that was known as the Integrated Power System Plan, or IPSP. The IPSP had actually been consulted on, submitted to the regulator for review and discussed intensively by many parties already. In fact, it had been in the public domain so long that updates had been requested a couple of times, and it was due for its regularly scheduled 3-year re-submission to the regulator in August 2010. Why is the process being re-set to stage one, people have asked, when it seemed to be so close to completing the last stage of a minor update?
Ontario has a carefully designed system of oversight for the power sector that is intended to provide for both long-term planning and the ability to respond to the needs of public policy. In theory, this combination creates an ideal context for investment, bringing both long-term stability and sensitivity to the concerns of the public.
However, everything has not gone according to plan. In some important respects, the reality on the ground has started to diverge from the plans and policies from above. The most obvious example of this is the difficulty the OPA seems to have experienced in producing updated system plans. The agency is eminently qualified to prepare plans and consult with stakeholders on them. Yet it has missed some key deadlines for producing updated documents. In 2008, when then-Minister Smitherman announced a significantly increased emphasis on green energy, the OPA was asked to update the IPSP and bring it back to the Ontario Energy Board. Months went by and no update was ever tabled. In September 2009 the same Minister asked Hydro One to begin work on grid expansions to accommodate all the new renewables, but work on that has slowed to a crawl. A few months later, Minister Duguid instructed the OPA to update the transmission plan to try to accommodate the new generation, setting a deadline of June 11, 2010. Unfortunately, that deadline passed with no transmission plan. The 3-year update to the OPA’s IPSP was supposed to be filed in August of this year, but nothing has come forward. Although there was no specific deadline, the OPA has so far been unable to release the much-anticipated revised procurement processes for Combined Heat and Power, despite years of effort and many assurances that they would be released soon. The status of Ontario’s nuclear development and construction program has been less than clear since it was put on hold a year and a half ago. The Economic Connection Test, a key component of the Feed-in Tariff program, has fallen seriously behind schedule. In fact the public and the industry, which depends on the ECT, have yet to see even the first set of results. Are these unrelated problems, or is there some kind of common issue underlying them?
It would be a mistake to see these disconnects as the failure of the agencies to carry out instructions. In fact, the affected agencies have been working faithfully to carry out instructions from the government to implement its green energy program, in all its many aspects. The OPA has produced a truly ambitious Feed-in Tariff program and a number of other procurement processes in record time that have drawn international acclaim. The OEB has produced a compendium of new rules and procedures for managing the connection process for new generators and for allocating the costs, and rethought many of its internal procedures to facilitate green power. Hydro One has established new capacities and procedures that allow it to process huge volumes of connection applications. The Ministries of Environment and Natural Resources have reconfigured their approval processes to meet the requirements of the Green Energy Act.
Without any doubt, the green energy program has created a tremendous administrative burden on many parts of the system, and some of the agencies are straining to keep up. But there are also concerns that the accumulated layers of mandates are starting to interfere with each other. Agencies in the power sector have been asked to maintain the wholesale market while supporting a hybrid system, produce a central plan while inviting unknown amounts of renewable generation, and to rapidly build out the system while continuing to be guided by the fundamental objective of protecting the consumer.
A key part of the picture is the long list of directives issued by the Minister to the OPA and the OEB. In addition to the directional mandates handed down in the form of government policy, the agencies are responsible for carrying out directives that run the gamut from establishing programs to assist low income energy consumers to setting aside transmission capacity for the Korean Consortium led by Samsung. The directives are commendable in that they are open and transparent, and published on the OPA’s website – an important characteristic in terms of maintaining clarity of direction and the confidence of the investment community.
None of these mandates or instructions are unworkable in and of themselves. But the combination, bit by bit, can weigh down the agencies responsible for implementation. Even worse, the net effect can lead to ambiguity in terms of operating priorities. This can affect not just the efficiency of the day-to-day work of the agencies, but the ability to plan with clarity. Too many one-off decisions that operate outside the planning framework can impact the effectiveness of any long-term plan, and undermine the overall planning process.
Clearly there is a need for a renewed long term planning process. However, given the experience with the previous long-term plan being overtaken by new developments, it would be wise to look at the medium term as well. How are all these expectations operating together and what do the agencies need, to ensure they will be able to carry out their many responsibilities?
In June 2009, it was noted in this column that the wholesale power market in Ontario has been burdened with many expectations. “Some measures have been entirely sound and sensible, but rarely has attention been devoted to the cumulative effect of all the rules and regulations. It just might be that the many layers of band-aids on this patient have become their own kind of burden on the system. There’s no doubt that the attention of the hospital staff has been diverted to maintaining the bandages almost as much as caring for the patient.”
Long term plans are great to have, but they are best if built on medium term plans. With a medium term plan, the government would not find itself on the defensive so often, or having to make one-off decisions like the October 7 announcement that transmission would be used to replace proposed gas-fired generation in Oakville. A medium term plan could be a more modest undertaking for the agencies, more easily updated in response to changing circumstances. Most important, it could answer key questions (at least more specifically than is the case right now), such as when and where the development community can expect to find connection capacity and investment opportunities.
Fortunately Ontario continues to have a wide range of options before it. We have a well built system, highly capable agencies and a plethora of technical options to choose from. These problems are not intractable, and can be addressed with policy and planning tools that are readily available. Renewed clarity is needed, but a major shakeup is not what’s called for at this point. The planning process needs to be examined in terms of how it can keep up with the many demands being placed on it. Policy pronouncements need to be reconciled with the realities of the system. Although the current issues should not be minimized or put off for another day, they will respond to sustained effort involving the full range of concerned stakeholders. These are the kinds of challenges that can be met if acknowledged early and faced squarely.
— Jake Brooks, Editor