This is an unusual period in the history of Ontario energy policy. Not only does the province have a long-term energy plan in place, but the current administration has a fresh majority mandate to stand on, which gives it a great deal of scope to implement challenging longer-term projects while refining the details of its existing plans. The 2014 election was remarkable in that voters apparently did not consider electricity to be a major ballot box issue, despite significant controversy over the cost of relocating gas-fired power plants, and the likelihood of cost increases ahead. Thankfully, there were no sudden reversals of electricity policy for electoral purposes during the course of the campaign. As a result, for several years at least, the government, the agencies, and the industry won’t be held back by uncertainty over questions of basic direction or priorities, nor burdened with implementing hastily-conceived campaign promises. Everyone is free to concentrate on how best to improve the system, on how to produce the best results starting from the same plan. A positive starting position, then.
Premier Kathleen Wynne has set off in a commendable direction priorizing public engagement, transparency, and open styles of governing. It sounds simple but its impacts can be profound. In 2013 she announced the “Open Government initiative” with a number of components. In a precedent-setting move, on September 25, Wynne made public the government’s instructions, known as a “mandate letter” to the Minister of Energy, along with similar mandate letters for all other cabinet ministers of course. Wynne’s letter to Minister Chiarelli stressed “bringing on new, clean generation and ensuring investment in the transmission system,” along with other priorities such as energy efficiency, renewables, price mitigation and of course community consultation. (See “Wynne releases cabinet mandate letters,” page 8, for more details.)
Although the direction and the high level plan may be set, there are still many second-level questions to resolve. Nearly everyone in the sector will have suggestions on what the work priorities should be. Here’s an open invitation to all of our readers: Send us your ideas on what challenging projects you feel should be high on the list to start during this season of promise. We will publish the most interesting and provocative views in a future edition of this magazine.
Without presuming anything about the outcome of the coming discussions, here are some suggestions on how to make good use of the time ahead:
Devise systems for reconciling local preferences with regional and provincial needs
The province and the agencies have expended considerable time and political capital developing systems for consulting communities about new power infrastructure. Significant parts of the engagement systems are still being rolled out and tested. Yet at the end of the day, if a community says its choices are at odds with those of neighbouring regions or of the province as a whole, what kind of obligations rest with each party to make accommodations until a viable compromise is found? A number of thoughtful proposals were put forward by the Mowat Centre in its 2013 report, “Getting the Green Light: The Path to Public Support for Ontario’s Power Plans”. For more information, see "’Getting the green light’ study finds paths to public support,” IPPSO FACTO, August 2013, and their latest report “Re-energizing the conversation”.
Regularize system planning under a fully developed review system
Although Ontario’s Long Term Energy Plan has undergone a form of public review, it does not substitute for a fully detailed system plan, nor does the relatively high level public review substitute for a rigorous review by regulators. The improvements in certainty and predictability that the LTEP represents can be multiplied and extended into the future with a periodic, consistent and rigorous regulatory review. The regulatory review can be made quicker and easier by ensuring that the broad directional questions are dealt with in a public process like that used to date for the LTEP prior to any regulatory review. The regulatory review, much as intended in the current legislation, can focus on assessing changes to plans every 3 years, looking at rolling updates to previously defined plans.
Tackle the problem of over-used directive powers
While no one would deny that government needs to have the ability to issue the occasional directive to its agencies, the frequency of directives and their level of detail in recent years has left some observers wondering whether the agencies enjoy the degree of independence required to maximize long run confidence in the system. Models of forbearance, established norms on the use of directives, and systems to minimize the use of directive powers in future would go a long way to creating a climate that will be seen as particularly attractive to new investment. As an added benefit, under such a scenario, responsibility for operational and technical decisions naturally shifts to agencies and regulators, while government continues to retain ultimate authority.
Propose policy guidelines for regulators on the tradeoff between grid costs and service costs
The Ontario Energy Board has the challenging task of reviewing applications for rate-based investment in grid infrastructure without a crystal ball. It has become apparent that what seems like prudent steps to minimize costs for new grid infrastructure might at times have the unintended effect of limiting customers’ abilities to access much greater savings in the form of energy efficiency, fuel switching, smart technology and alternative supply options. Unfortunately, that knowledge doesn’t provide much guidance in terms of which shared infrastructure investments should be added to the rate-base for customers. If customers are considering micro-grids and other forms of self-supply, the question becomes more complicated: Some customers can be expected to shoulder the risks for their own infrastructure investments, while all customers must carry the costs for shared infrastructure investments. How far should distributors and regulators go in terms of encouraging shared investments in advanced systems that will allow customers a reasonable range of options? Policy guidelines would help, if only to express how far regulators should go in enabling customers to subscribe to options that are full of promise while lacking extensive track records.
If the conversations on priority projects are conducted properly, this could be an incredibly fertile time for the energy sector. At various times in history Ontario has been a leader in hydroelectric generation, transmission system development, nuclear technology, wholesale market design and green power. With Ontario’s low-carbon supply mix, its strategic position in continental gas markets, a head start in smart grid, storage, and market-based trading technologies, the province could once again attract global attention and earn significant rewards for taking an advanced and far-seeing approach to the energy sector.
The next few years represent a major opening for progress in a number of promising areas. It’s up to the power industry, stakeholders, regulators and the government of Ontario, to make the most of this rare opportunity.
— Jake Brooks, Editor