Ontario is witnessing a rare and possibly unique convergence of attention on electricity sector governance amongst energy professionals, practitioners and stakeholders. Although APPrO and others have been highlighting the importance of governance and oversight for years, the range of parties currently prioritizing the issue is unprecedented, and the degree of concurrence on policy proposals is remarkable. Considering that a provincial election is less than a year away, the discussion could be taking place at a particularly critical stage of the policy development process.
Governance, meaning the system of oversight, checks and balances that affect energy policy and planning, has always been a concern to the energy industry. APPrO and others have recently stressed a number of basic principles for good governance including openness, transparency, independent assessment of need, rigorous cost benefit analysis of major decisions, and reliance on market forces wherever feasible. In a range of market evolution processes for example, APPrO has consistently noted that not only do market mechanisms attract investment most effectively in jurisdictions where the risk of political intervention in markets is perceived to be low, in fact improved governance is essential for effective implementation. At meetings of the IESO SAC and throughout the Market Renewal Project, APPrO has raised concerns of this nature. The response from other sector participants has been supportive and encouraging.
In a recent example of this trend, on September 18 the Ontario Energy Association released a paper setting out proposals to update the rules governing the provincial energy sector. Titled “Energy Platform” the document gave voice to concerns felt widely across the energy sector. Many of the ideas have been tested in practice, some in multiple jurisdictions. Other groups, including the Toronto Board of Trade, are expected to release statements of their own in the coming weeks.
Clearly responding to views expressed by stakeholders, both Ontario Energy Minister Glenn Thibeault and Ontario PC Leader Patrick Brown highlighted the level of attention they are devoting to governance issues at the Ontario Energy Association conference on September 25. Minister Thibeault said, “[W]e need to become less prescriptive and allow for leaders at all segments of the value chain to enter the energy market without a heavy-handed regulatory model getting in the way. ... Technology specific procurements that stifle competitive tensions and discourage innovation will be replaced by transparent and competitive market mechanisms. ... I believe that the best role for Government is to get out of the way of innovation and to stop attempting to engineer the evolution of the supply mix with overly prescriptive policies and procurements. I believe that the evolution of the energy and electricity sector will naturally continue, encouraged by competitive forces. And that, unshackled from technology-specific procurements, our supply mix will evolve to deliver on Ontario’s low carbon agenda without countless Government directives.”
Addressing some of the same themes, Ontario PC Leader Patrick Brown said, “(Y)our Association has asked for full transparency in .. decision-making. It’s desperately needed. ... if the Liberals are dead-set on signing even more deals, the Legislature should have the opportunity to review them, debate them, and vote on them. It’s the accountable and transparent way to do things. ... a stream of Ministerial Directives means a fractured, politically-motivated approach has replaced long-term planning and stability.”
The Ontario Energy Association’s energy platform, proposing or updating a range of measures designed to improve accountability and cost effectiveness in the energy sector, identified a number of relatively specific options. Its recommendations were based in many cases on concepts that are well-known in the industry. Such history likely only adds to the strength of the proposals.
A central tenet of the OEA paper is that Government should set high level policy directions while delegating implementation and technical decisions to independent agencies and industry players. High on the list of structural changes recommended were:
a) Requiring that major policy changes be approved by the legislature,
b) Transferring system planning to independent agencies,
c) Making cost benefit analyses mandatory for major infrastructure decisions, and
d) Optimizing the use of existing assets.
The OEA statement is likely to be followed by a number of related propositions from other players in the energy sector, many of whom appear to be aligned with key principles expressed by the OEA.
Governance issues have been raised recently in relation to the Market Renewal Project, Ontario’s Fair Hydro Plan, and the province’s discussions with Hydro-Quebec on power exchanges.
If energy becomes an issue in the 2018 provincial election it now appears possible that governance and oversight issues will become a significant focus of discussion, potentially displacing the province’s Long Term Energy Plan or LTEP which would otherwise have been expected to be the dominant theme in energy-related discussion prior to the election. Although public interest in governance per se remains to be clarified, polling data suggests that there is residual unhappiness about energy policy even though electricity rates are no longer the immediate focus of discord. Critics of the government have certainly begun stressing that the longer term impacts of current policy should be a consideration for voters in the election.
In effect, the question of energy sector oversight has moved from an issue of concern that operated primarily within market evolution and market renewal processes to a question under active consideration by groups of stakeholders organized to highlight the issue in wider public forums. As a result, one of the major causes of uncertainty for developers and investors in the energy sector may soon be addressed in a more direct and definitive way than has been the case for many years.
For a copy of the OEA energy platform see this location:
http://www.energyontario.ca/images/OEA_ENERGY_PLATFORM_-_Digital.pdf
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