By Sean Mallen, Principal, Sean Mallen Communications
When Energy Minister Greg Rickford stepped to the podium to speak to the APPrO 2019 banquet, he could not resist making an allusion to the conference theme, The Inflection Point. He drew a parallel with the Progressive Conservative government’s first months in office, saying he and his newly-elected Tory colleagues were “making our inflection point in the province’s energy system. Some of you may have been traumatized by it. I can’t apologize.”
When Rickford spoke at the 2018 conference, he was barely 5 months into the job and the Tories were already shaking things up, cancelling the previous government’s cap and trade program, tearing up 750 renewable energy contracts and repealing the Green Energy Act.
The Tories’ stated focus was and is to reduce costs for consumers, a commitment that drove an announcement he made just two weeks earlier, directing the IESO to undertake a third-party review of generation contracts.
The minister’s initiative turned heads among power producers, particularly given the young government’s record of cancelling contracts in the name of reducing power bills.
Rickford described the review as “an intelligence gathering process. It’s part of our continuing plan to seek out efficiencies, as we continue in our unrelenting effort to build a reliable, transparent transmission system that is effective, efficient and provides an opportunity for us to and deliver cost savings to the ratepayer.”
The review will unfold rapidly, with the system operator ordered to deliver its findings by the end of February 2020. The minister advised producers to be active participants. “It might be a good idea to proactively approach IESO with your tailored solutions,” he told the conference audience.
The review is clearly top of mind for APPrO. President David Butters told the conference that they have just concluded a review of members’ leading concerns for the next 3-5 years and found that contracts and procurement were number one, followed by political interference, followed by electricity prices. All those issues are interconnected.
During a session earlier in the day, Butters saw picked up on a question from the floor about the consequences of cancelled contracts, saying: “that’s where things go sideways. The more you micromanage, the more problems you create.”
In a panel on the political outlook, Brad Lavigne of Counsel Public Affairs, a former advisor to NDP leaders, said the contract review should be of concern. “I can only imagine that renegotiating or ripping up contracts is something that will keep people up. Seems somewhat an erratic governance model,” he said.
But Dan Moulton of Crestview Strategy, a former advisor to a Liberal energy minister, said the IESO review may also prove to be an opportunity. “If you have a contract expiring in 10 years, now might be a good time to go in and pitch a 30-year contract. There’s actually an opportunity now to extend your contract,” said Moulton.
Panelists noted that the Ford government has recently been sounding more conciliatory. Mitchell Davidson of StrategyCorp, the former head of policy for the Premier, said the government is inclined to listen to reasonable ideas. “The government is looking for creative ways of doing things. If you have interesting solutions, you might be surprised at the open door you’ll get now.”
These were words welcomed by APPrO President David Butters.
“I think members are encouraged by suggestion that contract discussion will be an opportunity. This is a sector full of really smart people. The government needs to tap into that.”
Political interference in the energy sector is a perennial point of concern at APPrO conferences and 2019 was no different.
Evan Bahry of the Independent Power Producers Society of Alberta said “[O]ur ask of the government is simply to adhere to market principles. The track record has helped us make that point. Let producers serve their customers. I think we’ve proved that very well.”
Butters echoed the point: “I say electricity is dangerous and it can kill you. Governments should be looking to the market and private sector to make investments.”
The PC’s as yet unfulfilled campaign promise to cut consumer power bills by 12 per cent is also causing some trepidation. “There’s no magic way to do that. It remains a concern for us,” said Vince Brescia of the Ontario Energy Association.
The panelists at the political session warned that if prices rise next year, even if it is only a minimal increase, there could be consequences.
“Every single time they go up, the premier will react,” said Mitchell Davidson. “They’ve obviously committed to reducing rates. And if a consumer sees his bill is up, he’ll say ‘I didn’t vote for that’. It’s going to ramp up the pressure to tell the people in the room … here’s what we’re going to do.”
Matthew Gibson of Sussex Strategy Group, an advisor to a past Tory Energy Minister, said the government should not be too tied to the 12 per cent promise. “(Former Premier Kathleen) Wynne gave voters a 25% cut (through the Fair Hydro Plan) and was reduced to 7 seats,” he observed.
Despite the uncertainties, there was also substantial good news to share at the conference.
In a keynote speech, IESO CEO Peter Gregg cited projections that Ontario is “energy adequate” for the next 20 years. “That means we do not need new build to meet our needs. It’s a very positive statement. We’re in a good position with our energy,” said Gregg.
People in the sector might have also been relieved to hear that electricity is not the burning issue among the general public that it has been in the past.
Greg Lyle of Innovative Research Group shared recent poll results showing only 2 per cent of Ontarians picked electricity as an important issue. Two years ago it was at the top of the list. Now, the environment is number one.
Given past history, this is a case where less public attention might be a good thing.
— seanmallencommunications.com