Professional opinion
The outlook for Ontario energy policy, post-election
Change is a fact of life. In Ontario the electricity system is constantly changing with the evolution of new technologies, new consumer needs, and innovative new approaches – all vying to help reinforce the resilience of a system built on maintaining balance. The dependence on electricity where and when we need it is absolute, and government has always been deeply involved in the electricity system for this important reason. The public demands it, and politicians pay attention.
Chris Benedetti, Sussex Strategy Group
But the public demands more than reliability. They want their electricity services and products to be responsive to their needs and habits, and of course affordable. The ability of politicians and governments to balance reliability, sound management, and keep costs affordable, is critical.
The election of a majority Progressive Conservative government marks a watershed moment. The voters gave the PCs a very clear mandate to fix perceived ills in the system. “Hydro costs” turned out to be a dominant theme in the campaign, with all parties pledging different solutions to lower costs. Be it assertions of high prices harming the pocketbooks of families and businesses, accusations of mismanagement, or promising to reform and expand natural gas access across the province, the PCs did not shy away from talking about energy. To be fair, energy-related issues have been something that the PCs have tried to capitalize on for at least three election campaigns. This time it stuck.
Beyond promises to take action on management at Hydro One, the central PC commitment is to further reduce the Regulated Rate Plan for residential and small business customers by another 12% (in addition to the 25% brought about by the Ontario Fair Hydro Plan). This intended rate reduction would be achieved by shifting Hydro One’s dividend to the rate base, moving conservation to the tax base, and placing a moratorium on new energy contracts and cancelling or renegotiating certain generation contracts. The PCs committed that reductions will begin January 1, 2019, meaning that these changes must be implemented quickly.
This is not the first time a government has used measures to shift costs between the rate base and the tax base. Still, some of these approaches may be challenging. While the Ford government will be fully fixated (and rightly so) on affordability and reliability issues in the sector, reconciling commitments to a moratorium on contracts and a cancellation of existing contracts while maintaining reliability will be something to watch.
There are also areas not mentioned during the campaign but that did appear in an earlier PC platform, including lessening the spilling of water from hydro facilities to better serve industrial customers, reinforcing if not expanding net metering, governance reforms and moving back to an IPSP-style of system planning, OEB reform and finding ways to lessen red tape and to reduce the cost of citizen participation, and being nimble and adaptive to the emergence of new technologies. This while exploring options to make electricity rates more competitive for businesses – an urgent necessity for many industries across the province.
The PCs have also pledged to end cap-and-trade and withdraw from the Western Climate Initiative. They have pledged to initiate a challenge against the federal government and their consequent move to impose the federal carbon tax backstop. As such, environmental imperatives may shift downward in priority when compared to the focus of the outgoing Liberal government. But non-emitting technologies from nuclear to renewables have important roles to play, and new resources like storage promise to build greater flexibility into the system. Existing infrastructure and assets are important. The PCs have pledged to continue to support continued operations at Pickering NGS and the 10 unit refurbishment of Bruce Power and Darlington NGS. But needs do exist in the system – be it in the near term should the province experience higher than forecasted demand (which the IESO has identified if Ontario has a hot summer), to capacity shortfalls in the early to mid 2020s.
Ensuring that today’s resources can continue to serve communities and businesses across the province is an absolute necessity. Building transmission to connect remote communities and reinforce our existing system will need to be supported. So too will embracing new and innovative approaches to our distribution networks and new ways to induce investment. Harnessing private sector investment in the sector to address reliability gaps in the future will be important, rather than crowding out investors.
The PCs also announced that they would cancel the Ministry of Infrastructure’s Natural Gas Expansion Program, and rather support projects that enable the expansion of access to more communities by making it easier for private sector investment to take place. Projects announced earlier this year are expected to continue, but their funding arrangements may be altered to conform to the new policy.
There will be other policy, planning and program initiatives that will likely be adjusted and initiated by the incoming government. While the PCs had stated in an earlier platform a commitment to market reform akin to the existing IESO Market Renewal process, the Long-Term Energy Plan and associated IESO and OEB Implementation Plans may be changed. There are also ongoing reviews of the Conservation First Framework, the OEB Modernization Panel Review, and programs underway that are at varying stages of consultation and execution, including the GreenON Challenge Fund, the Smart Grid Fund, and the International Energy Demonstration Fund. All of these could be reviewed. So too might tax holidays to encourage distributor consolidation, that are presently on course to expire at the end of this year.
Premier-designate Ford will now have the authority and runway over the next four years to put his stamp on the system. A transition team has been quickly appointed and a Chief of Staff named. In his first press conference Ford struck a conciliatory tone, pledging to work on behalf of “all Ontarians”, and to collaborate with municipal and federal leaders to address mutual interests in infrastructure, trade with the United States, and strengthening the economy.
The new government will officially take over on June 29th, and between now and then a Cabinet will be appointed. It is possible that there could be some amalgamation of ministries, reducing down the 28 portfolios that existed during the tenure of Premier Wynne. Over the summer staff will be appointed to various offices. The Legislature will reconvene, and a Speech from the Throne will take place laying out the government’s legislative and policy priorities.
Legislative reform – such as amendments to the Energy Statute Law Amendment Act and the Electricity Act, repealing the Green Energy and Economy Act and changes to the Climate Change Mitigation and Low-Carbon Economy Act, have all been committed to, but will take time.
It will be important for stakeholders to help the government act in a prudent and focused way, prioritizing measures that will make energy more affordable, make the system more resilient and reliable, and look to new and innovative solutions that can accomplish these objectives. New technologies, new ways of doing things, and new means to plan, regulate and execute, will all be on the table. Challenges no doubt lie ahead, but so too do new opportunities for stakeholders and government to work together cooperatively and collaboratively.
See also the following publications with related information:
The full Sussex Strategy Group report on provincial energy and environment policy post-election:
http://sussex-strategy.com/posts/sussex-ontario-election-update-energy-and-environment
David Stevens of Aird & Berlis has released an article titled "What’s Next Under Ontario’s New Government" focused on provincial energy policy, published June 12, 2018.
Caroline Jageman published an article titled "Doug Ford vs. Ontario Hydro brass" in the Lawyer's Daily, June 11.
A post-election brief from Canadians for Clean Prosperity is published at this location.
Canadian Press released a report on June 12 focusing on prominent MPPs who may become members of the Ford cabinet: link.