Toronto: In a wide-ranging report released December 5, Jim McCarter, Ontario’s Auditor General, raised a number of questions about the provincial power system and put forward some recommendations to make it more accountable. While the report dealt with issues as diverse as auto insurance, LCBO prices, forest regeneration and legal aid, it devoted three sections, more than any other single area, to the electricity system. High level comments included the following: “The Green Energy and Green Economy Act authorized the government to fast-track the development of wind and solar power projects without many of the usual planning, regulatory, and oversight processes. On a go-forward basis, it will be important that government decision-makers are provided with information to assist them in striking the appropriate balance between promoting green energy and the higher electricity prices that households and business enterprises will be paying for such energy.”
With respect to the stranded debt of the former Ontario Hydro, the Auditor General noted that “consumers have paid $8 billion, but the Minister of Finance has never provided a public update on how much of the debt remains—even though the Electricity Act requires the Minister to do this ‘from time to time.’” The report also commented on the Ontario Energy Board and how it might reduce the cost and complexity of certain regulatory procedures.
One of the key recommendations focused on helping consumers understand charges on their electricity bills: ”To ensure that electricity ratepayers understand why their electricity bills are rising at a much higher rate than inflation, the Ministry of Energy and the Ontario Power Authority should work together to increase consumer awareness of the concept of the Global Adjustment and make more information available on the cost impact of its major components.”
In its response to this recommendation, the Ministry cited its existing education efforts and said, “The Ministry will continue to work with the Ontario Energy Board, local distribution companies, the OPA, and its other partners to seek opportunities to further increase public awareness about energy prices. The Ministry will also explore options for an integrated media campaign, which could include web postings and fact sheets and other opportunities.” The OPA said it agreed with the recommendation and noted that it “maintains updated cost forecasts and has substantially completed an update of the Integrated Power System Plan, which will contain a detailed cost and bill-impact analysis.”
The AG’s report made a particularly poignant observation about governance: “Under the legislation, the Ministry and the OPA would continue to provide the government with advice on the development of renewable energy, but the Minister essentially had the authority to direct the OPA, which minimized the need for an analysis of different policy options and an assessment of the cost-effectiveness of alternative approaches. ... billions of dollars were committed to renewable energy without fully evaluating the impact, the trade-offs, and the alternatives through a comprehensive business-case analysis.” Prior to the passage of the Green Energy Act, the Ministry’s directive powers over the OPA were temporary, to be used only until there was an Integrated Power System Plan approved by the regulator.
It also recommended the following: “To ensure that the price of renewable energy achieves the government’s dual goals of cost-effectiveness and encouraging a green industry, the Ministry of Energy and the Ontario Power Authority should:
• work collaboratively to give adequate and timely consideration to the experiences of other jurisdictions and lessons learned from previous procurements in Ontario when setting and adjusting the renewable contract prices;
• work with the Independent Electricity System Operator to assess the impact of curtailing renewables as part of its energy planning in order to identify ways to optimize the electricity market; and
• ensure that adequate due diligence is undertaken, commensurate with the size of electricity-sector investments.”
The Ministry said that it “agrees to continue to provide a full analysis of new investments, including through the Integrated Power System Plan, which is to be updated every three years. This will ensure that system planning continues to reflect the most up-to-date and accurate information and challenges affecting the system.”
Recommendation 6 focused on the uncertainty faced by generators without confirmed connection capacity: “To provide investors who have submitted applications for Feed-in Tariff projects with timely decisions on whether their projects can be connected to the grid and to ensure that adequate transmission capacity is available for approved projects, the Ontario Power Authority should work with the Ministry of Energy and Hydro One to:
• identify practical ways to deal on a timely basis with the FIT investors who have been put on hold; and
• prioritize the connection of approved FIT projects to the grid.”
For more information see the Auditor General’s website at www.auditor.on.ca, and the article titled “APPrO highlights benefits of CMSCs,” page 11.