When Dalton McGuinty stepped out of his central role as Premier, he created a natural opportunity to assess the nature of the progress and change that’s taken place in Ontario over the last decade or so. The books are yet to be written, but he has generally left a positive impression on the public. Many are saying they see a man of personal integrity and good intentions. He stayed out of the mud pit and helped raise the standard of public debate, something that will serve the province and the country well for years to come. Premier McGuinty’s record was not without errors, but in his own words he was someone who did more good than harm. By many accounts, this general assessment holds true for his work in the electricity sector. It is possible to find examples where his policy on electricity went astray, but there were some noteworthy high points.
Although the issue may have been over-stressed for partisan purposes, it is important to recognize that Ontario was suffering from under-investment in the power sector when McGuinty came to office. He quickly established systems for procurement of generation capacity on a competitive basis, overseen by a fairness commissioner, and respectful of the importance of the continuing unimpeded operation of the wholesale market. Those systems were put in place with a strong sense of purpose and yet a genuine concern for maintaining a positive climate for private sector investment. The result was a remarkable expansion of new investment in generation, and a set of investment conditions that was the envy of much of the world.
McGuinty raised the bar in terms of public engagement with energy policy. He encouraged the public to talk concretely about energy options, including prices, and he took the bold step of deliberately presenting electricity policy as an election issue, and provided meaningful material for politicians and the public to debate by tabling a fairly detailed and costed plan for the sector – the Long Term Energy Plan. Reasonable people can differ about the content of the plan he proposed, but he elevated the debate to a level not seen before in the province. That experience of having been engaged in a substantive debate on energy policy, based on a plan that went well beyond generalities, will serve the province well as it faces future choices in energy policy.
The public engagement fostered by McGuinty took several forms. It included the government talking directly to the public about broad policy choices and its specific energy plans during elections, resisting the urge to artificially suppress prices across the board, and setting up the system to encourage regulatory review of electricity plans in a systematic fashion between elections. (Of course he strayed from these principles, but the initiatives were important in terms of setting direction.) He took the risk of making energy choices a public policy issue before an election, knowing that this would require preparing large numbers of citizens to follow debate in an area that had usually been minimized during elections. He recognized that, if one assumes that the public is uncomfortable with paying the full cost of energy, the appropriate method to address the price problem is through financial aid to individuals, not through subsidized electricity prices. Thus we saw the introduction of the Ontario Clean Energy Benefit – which came from the Treasury, not from manipulated prices. Political craftsmanship that adds up to the same ultimate price, some might say, but it was a far better policy and precedent than general subsidies on all power, or suppressing the total price of electricity.
McGuinty was not able to remedy the discomfort Ontarians have with seeing the full scope of energy costs reflected in price, but he did recognize reality and move Ontario closer to understanding and accepting the real costs: In 2003 he removed the artificial rate freeze and spoke openly about the importance of moving toward realistic prices. Throughout the changes of the next nine years the HOEP remained the actual price paid by commercial customers, and a reference point in contracts, despite a host of structural reforms that could easily have made it completely irrelevant.
To the amazement of many, he went on record acknowledging in advance of an election, that green energy and other investment plans would raise electricity prices by 46% over 5 years. That is an act of political courage that has never been matched. (See “Government tries to explain rising energy costs,” and “Election-style sparring begins over power prices,” IPPSO FACTO, February 2011.)
Without much fanfare or controversy, Dalton McGuinty quietly moved Ontario’s power system in the direction of gas. The OPA developed what it called a “smart gas strategy” that made new gas-fired power projects financeable without requiring them to displace carbon-free base load energy from nuclear or renewables. This gas strategy was sensible at the time but became increasingly attractive as the shale gas revolution began to take shape. He seemed to understand that there is a relationship between the introduction of smart grid technology, electric vehicles and distribution-connected generation, even if the targeted timing of these developments was left unclear.
Mr. McGuinty’s legacy is not nearly so bright with respect to NUGs or CHP. Time and again the sector was promised a comprehensive, renewed approach to procurement of these efficient and highly attractive sources of energy. Sadly, in the rush to bring on renewable energy, there was only a disjointed and largely ineffectual effort to secure capacity from NUGs and CHP. To this day there is no clear plan to procure from either of these sources, despite a series of words and even directives from the government that seemed to go in a positive direction stretching as far back as 2005. The failure to procure can’t be laid at the feet of the OPA who generally have been very effective at procurement when clearly mandated to do so. Renewable sources of power clearly did not suffer from the same problems.
If there is one cautionary tale to be drawn from the McGuinty legacy it is about forbearance. Despite being a man of high principles and one who generally understood the need to stand back and let his supporting cast play its roles, at times it appears that he or his staff could not resist the urge to intervene in the workings of the government’s energy agencies. Probably the most commonly repeated line of advice is that leaders should tell their agencies what they want accomplished, but don’t tell them how to do it. In McGuinty’s first term of office he established sensible mechanisms in the OPA and other independent agencies that allowed for planning, procurement and other essential functions to operate largely independent of the cabinet and the policy function. The political people were expected to set objectives and key principles, express them transparently in directives, and then step aside and let the agencies do their work. Great things can be accomplished with this model. In fact, in terms of phasing out coal and achieving supply adequacy, this approach served everyone well for the fist half of McGuinty’s term in office.
When Dalton McGuinty decided to cancel two gas-fired power plants he was acting much like his predecessor Ernie Eves, who in the dying days of his administration walked away from his own energy policy and imposed a hasty one-off reversal with major financial impacts. In both cases, it was the decision to depart from their own policy direction that bit them in the back. In the case of Ernie Eves, his government set up an open and competitive market for electricity with prices determined by supply and demand, and then he stepped in to try to control prices. In McGuinty’s case he set up an arm’s length agency to try to locate power plants and then over-rode its decision on where to put two of the power plants. Both governments stumbled as they tried to reverse their own energy plans.
Many in the electricity sector were disappointed when the Integrated Power System Plan was suspended in 2008 and the government became increasingly prone to using directives to micromanage its agencies. While the use of transparent directives is incomparably preferable to agencies receiving directions through private communications with the minister, there was no need to intensify the use of directives in order to achieve the government’s green energy objectives. In fact, the government’s green energy objectives might well have been more effectively achieved through simpler general directives to meet certain targets, and letting the agencies determine the specifics. To be fair, it’s not clear how much Dalton McGuinty was involved in these decisions. However, one of the long term implications of the Green Energy Act may well be a prolonged effort at finding ways to dial back Ministerial involvement in the operation of the agencies, including planning, procurement and regulation.
Like that of any man who served the public for many years, Dalton McGuinty’s record is rich and impossible to sum up in a few words. He certainly will be remembered as the champion of wind farms and solar projects. He created an updated system for sensible planning and regulation of the power sector – even if his government didn’t always live up to its own principles in those areas. He deserves credit for setting up a system for procuring long term power in a market-sensitive way, and for engaging the public in energy policy. He was sincere and honorable in his dealings with people. He put Ontario on the map as a world class player in smart energy technology and he gave all of us cleaner air to breathe.
— Jake Brooks