Speakers at the APPrO 2019 conference anticipate intensive work in the near future addressing a combination of new and legacy issues facing the sector. At the same time as trying to reduce unnecessary costs, it will be important to prepare for a suite of new challenges including developing a workable approach to integrating Distributed Energy Resources. In a plenary session dedicated to exploring the top concerns of the development industry, it was apparent that governance and Cost Benefit Analysis remain high priorities for many market participants.
APPrO President Dave Butters stressed that direct intervention by government is very risky. “Electricity is dangerous and it can kill you,” he said, underlining a message that’s been part of industry briefs to numerous governments. While the physical risk is well appreciated, governments may sometimes underestimate the political complications of direct intervention into the power sector. He reminded the audience that government is most effective when setting directions and mandates for the industry and regulators.
Vince Brescia, the CEO of the Ontario Energy Association concurred and said, “You can’t ever get the politics out. What you can do is stabilize the system and have it be seen as well run. We can let the independent planners and the OEB manage the system. … They (the government) could step back and just give broad policy direction (and be perceived as responsible overseers), when they are letting the professionals manage it.”
Dave Butters observed that there are risks of too much regulation just as there are risks of too little regulation. Every jurisdiction should be focusing on the finding the right balance. However, with disruption and uncertainty comes opportunity. There is much to be gained by collaborating across jurisdictions to support the successful integration of DERs and other forms of modernization.
One of the key solutions proposed by a range of electricity market participants is to institute rules that would subject major energy decisions to a rigorous form of cost benefit analysis (CBA). This is common practice in the U.S. and other jurisdictions, and was one of the recommendations of a report on governance prepared by George Vegh for APPrO and the OEA in 2017 and reiterated in a multistakeholder platform released by the Ontario Electricity Stakeholders Alliance.
Dave Butters said, “We don’t do any cost benefit analysis. We sort of assume that if we go down this path, it will be all bright and shiny new. We will all pay less. Something that APPrO has been pushing for … is more public transparent cost benefit analysis. … If it’s net beneficial let’s do it. That would save everybody a lot of money.”
A wide range of stakeholders has been encouraging the government and regulators to institute robust systems transparent effective cost/benefit analyses when making decisions.
Evan Bahry, head of the Independent Power Producers Society of Alberta, noted that Alberta has seen troubling levels of interagency conflict. In one case a certain Alberta agency found itself in dispute with a second agency, forcing it to appear in a hearing before a third agency. While independence between the agencies is desirable, in practice this leads to conflict more often than collaboration. He recommended more attention be paid to organizing and reconciling the approach of the various agencies responsible for overseeing the electricity sector. He noted that, in Alberta’s recent capacity market hearing, “we had four agencies proposing market design ideas. We could have had a full hearing of just the agencies cross examining each other.”
Vince Brescia noted that there seems to be opportunity to improve the alignment of the OEB and IESO with respect to strategy and thinking on DERs. “We would like to see the IESO and the OEB more enmeshed in thinking about a strategy for DERs. To take advantage of them for ratepayers it’s going to take some co-ordination.”
Dave Butters noted that this is consistent with proposals in which the OEB might give the expected investors, developers, and operators of DERs the opportunity to contribute to strategic planning.
Mr. Brescia raised concerns about the money being spent: “We are spending about $350 million per month to subsidize the system. It’s just not sustainable.”