When the Ontario government introduced Bill 75, its legislation to merge the IESO and the OPA, it simultaneously opened a series of questions on the division of responsibilities, the purpose of planning, and the degree of involvement the Minister will have in the sector. Some observers are even suggesting that the bill will change the nature of regulation in the electricity sector, something that could have long term consequences through its impact on the investment climate in a capital intensive sector.
In these pages you will find observations from a range of leading thinkers on what the new legislation means, or could mean, for the sector. First, we present commentary by Jan Carr (veteran of the Macdonald Committee and the first CEO of the OPA) on what’s necessary to protect the integrity of the market as agencies are consolidated, among other things. Ian Mondrow, senior regulatory lawyer at Gowlings, provides his observations on the implications of Bill 75 for regulatory work, LDC consolidation and the East-West tie line. George Vegh examines the analytical options as they might operate free of ideological conventions. Robert Warren provides more of his incisive analysis of regulatory arrangements from a consumer perspective. Steve Kishewitsch, IPPSO FACTO’s regular contributing writer, reports on his survey of the views expressed by key stakeholders in the power sector.
The first layer of issues raised by Bill 75 are the questions about how the functions of the former OPA and IESO will be transferred and transformed to operate under a new umbrella, the OESO. How will the existing mandates be protected, and how will the risk of conflict or compromise between previously separated functions be managed?
The second set of issues is related purely to the likely impact on the operation of the market resulting from the change. The impact could be minimal, but the response of investors and commercial operators in the sector is critical to the success of any plan. Therefore some prior assessment of their readiness to respond to the proposals is a crucial factor to consider.
Probably the widest ranging discussion is around the role of planning in the power sector. While one part of planning is related to securing regulatory approvals for key parts of a plan, the broader purposes of planning include establishing a consultative exchange, and securing social license. Clearly, some aspects of planning, the supply mix at the very least, are essentially political, whereas other aspects are more technical. This helps to determine what needs to be enshrined in legislation and what can be left to other mechanisms. But it doesn’t answer the perennial questions: To what extent should government policy operate in the planning of the sector, and in what form should plans be subjected to regulatory review? One massive integrated plan, or several smaller proposals? Almost all the basic questions about planning are back on the table.
One of the most challenging areas raised by Bill 75 is the scope of powers retained by the Minister’s office and the Ontario Energy Board. While some see some very troubling trends in terms of politicization of the sector and the reduction of regulatory independence, others see an inevitable coming together of related functions. Transparency is key to resolving such questions and it’s through the commentary of people like Ian Mondrow and others that we invite you, the reader, to make your own judgments and even express your views on these critical questions of our day. The appropriate role of government is a question that will likely never go away!
Two relatively narrow questions on Bill 75 have particularly acute commercial and economic significance for the sector. The first relates to the provision for one-off regulatory review of any contract or procurement decision, without any time limit. The second is the creditworthiness of the new agency, the OESO. Resolutions on each are relatively easy to imagine, and considering that failure to come to grips with these issues could seriously impede all financing in the sector, it’s assumed that solutions will be found relatively quickly.
Questions of ring fencing and internal separation of functions are already addressed in the legislation at a general level. But the relatively specific options will need to be the subject of discussion throughout the sector. IPPSO FACTO will be honoured to report on discussions amongst market participants on their views as to what would require special new business processes to ensure the impartiality of market operations is not compromised.
See also the following related stories:
| Special feature on OPA-ISEO merger and Bill 75: The OESO and Competition (News/Ontario News) |
| Merging an organization that is mandated to ensure there is adequate investment in generation – the OPA – with one charged with ensuring generators compete – the IESO – … |
| 01 Jun, 2012 |
| Special Feature: The OPA-IESO merger – a post-ideological perspective (News/Ontario News) |
| A framework to assess the proposed merger of the IESO and the OPA. This involves identifying the major challenges to be addressed in the sector and asking whether the combined entity – t … |
| 01 Jun, 2012 |
| Special Feature – Competition vs. control: A(nother) fork in the winding road of Ontario’s electrici (News/Ontario News) |
| Though it has been more than a decade since the “competitive electricity market” in Ontario opened, and then closed, there are believers who continue to talk about competition as t … |
| 01 Jun, 2012 |
| Special Feature - Bill 75 and the Auditor General’s 2011 Report: Lessons not learned (News/Ontario News) |
| Bill 75 has, as its principal objective, the merger of the OPA and the IESO into the OESO. The Bill raises a number of interesting governance questions, chief among them how conflicts between … |
| 01 Jun, 2012 |
Special Feature: Experts weigh in on Bill 75 and the OPA-IESO merger
IPPSO FACTO sought the opinion of a wide range of experts in various fields – legal, finance, environment, customer representatives, distributors and academia, on the import of Bill 75 and the expected merger of the OPA and the IESO.