After a year of stakeholder consultation, on October 26, 2017, the Government of Ontario released the 2017 Long-Term Energy Plan (“LTEP”) entitled “Delivering Fairness and Choice”. The LTEP is focused on innovation, electricity affordability and modernization of the electricity sector. This is the first LTEP that has been released by the Minister of Energy since the new statutory framework was implemented by way of Bill 135 which moved long term planning from the Independent Electricity System Operator (the “IESO”, formerly the Ontario Power Authority) to the Minister of Energy. The LTEP is intended to give the Ontario electricity sector, its stakeholders and consumers a roadmap of the Ontario Government’s priorities for the future of Ontario’s electricity sector. The LTEP impacts Ontario’s electricity sector in the following ways:
- Electricity Prices: Ontario’s Fair Hydro Plan reduced electricity bills by 25% on average for residential consumers and small businesses across Ontario. The LTEP reaffirms that electricity prices are forecasted to be below projected prices included in the 2013 LTEP. The outlook for electricity prices for large consumers will be, on average, in-line with inflation over the forecast period.
- Procurement: unlike past LTEP’s, the LTEP does not set out specific procurement targets for new supply of generation (or re-contracting existing assets) but instead reinforces the idea of maximizing existing assets through refurbishment (nuclear and hydro) and through the IESO’s Market Renewal, relying on competitive markets instead of long-term electricity contracts and relying on conservation demand response and electricity storage.
- Market Renewal: the LTEP addresses the IESO’s current efforts towards transforming Ontario's wholesale electricity markets through Market Renewal and the introduction of a capacity auction in the early to mid-2020s. Market Renewal will also incorporate Ontario’s Climate Change Action Plan and will be designed to reduce ratepayer costs by an estimated $5B in the decades between 2021 and 2030, reduce GHG emissions as well as decarbonize the fuel sector.
- Net Metering: the net metering framework will continue to be enhanced so as to allow consumers the ability to offset the electricity they buy from their Local Distribution Company (“LDC”) with electricity generated by their own renewable energy systems. Net-metered customers also receive credits on their electricity bill for the electricity they send to the grid, reducing their total bill charges.
- Electric Vehicles (“EVs”) and LDCs: the LTEP aims to grant LDCs the ability to better integrate EVs, charging stations and storage facilities onto their grids and into consumers’ homes.
- Ontario Energy Board (“OEB”) and Condos: the LTEP speaks to new abilities of the OEB to regulate individually-metered condo and apartment units in Ontario. This plan seeks to increase consumer protection and regulate private companies who provide metering services to condo and multi-dwelling units.
- Electricity Bills and Plans: the LTEP grants the OEB and LDCs the ability to redesign electricity bills to increase transparency and consumer understanding of their energy usage and costs as well as grant consumers greater choice in their electricity price plans by providing alternatives to time-of-use pricing.
- Innovation, Conservation and Consumers: the LTEP aims to expand the Green Button Initiative to provide consumers with the ability to access their energy usage in real time, manage their use and conserve energy when prices are high.
While Ontario is currently experiencing an adequate supply of electricity, a shortfall in capacity is expected beginning in the early-to-mid 2020s as the Pickering Nuclear Generating Station reaches its end of life, and nuclear units at Darlington and Bruce are temporarily removed from service for refurbishment. The demand for electricity is forecast to be relatively steady over the planning period. In the long-term, the IESO projects an increase in overall demand as electrification of the economy (especially the transportation sector) increases. As stated above, this need for additional capacity will be met through initiatives under the IESO’s Market Renewal.
On October 25, 2017, Glenn Thibeault, the Minister of Energy, issued several directives (the “Directives”) that require the IESO1 and the OEB2 to undertake activities to support and implement the goals of the LTEP. These Directives focus on conservation and demand management (“CDM”), reducing the cost of electricity for consumers, regulating electricity transmitters and distributors, spurring innovation and supporting indigenous capacity and leadership.
One Directive was issued to the IESO which instructed it to submit an implementation plan containing an outline of the steps that the IESO intends to take to implement the following goals of the Ontario government by no later than January 31, 2018:
- Indigenous Capacity and Leadership: supporting local opportunities in the electricity sector for First Nations and Métis and improving the availability of conservation programs for First Nations and Métis.
- Distributed Generation: develop a program to support a select number of innovative renewable distributed generation demonstration projects, strategically located and paired with other distributed energy resources and smart-grid technologies, as well as virtual net-metering demonstration projects.
- Storage Facilities: in coordination with the OEB, review market rules, industry codes, and regulations, in order to identify potential obstacles to fair competition for energy storage with other technologies in the delivery of services and, where appropriate, propose mitigation strategies.
- Hydrogen Fuel: identify options for pilot projects that evaluate the electricity system benefits, costs and GHG emission reductions of using electricity to create hydrogen.
- Bulk System Planning Process and Transmission: develop a formal integrated bulk system planning process that ensures solutions are identified transparently as needs materialize. The process shall also include a coordinated, cost-effective, long-term approach to replacing transmission assets at end of life including developing a competitive transmitter selection or transmission procurement process that is transparent, efficient and able to respond to changing policy, market and system needs.
Two Directives were issued to the OEB which instructed the OEB to submit an implementation plan containing an outline of the steps that the OEB intends to take to implement the following goals of the Ontario government by no later than January 31, 2018:
- Regulating Distributors and Transmitters (each a “Utility”): examine and identify steps for strengthening Utility accountability and reporting in relation to service quality issues identified by their customers, including but not limited to customer reliability and power quality. In doing this, the OEB shall consider transparency, responsiveness to customers, efficiency and cost-effectiveness, in addition to such other principles as the OEB considers appropriate.
- Modernization of the Electricity Sector: examine and identify steps for advancing the cost-effective modernization of Ontario’s electricity sector including: smart grid and non-wires solutions, active system management and customer participation, energy efficiency measures on distribution systems and replacement of transmission and distribution assets at the end of their service life.
- Distributed Generation and Storage Facilities: assess market opportunities and facilitate those that would reduce costs and provide value for customers, and identify barriers to the development of distributed energy resources, such as energy storage, at scales and locations that provide value to customers and the bulk and local distribution systems.
- Ensuring Affordable and Accessible Energy: identify areas where additional authorities or tools would enhance the OEB’s capacity to regulate the sector in the public interest including: mitigating costs for ratepayers by enabling more efficient and proportionate review of Utility applications, protect consumers in the natural gas sector, reduce costs and find efficiencies in distribution sector, such as shared services amongst LDCs and strengthen consumer protection in unit sub-metering.
- Energy Conservation and Efficiency: move forward with the implementation of the vision embedded in the OEB's Regulated Price Plan Roadmap, including consideration of new pricing structures that give greater consumer control, make it easier for consumers to respond to pricing signals and incent consumers to do so; and tools to enhance energy literacy and consumer understanding of the energy sector.
- Conservation and Demand Management: the Directives also amended the Minister of Energy’s March 31, 2014 directive on CDM by removing behind-the-meter generation using fossil fuels from the definition of CDM and adding reduced electricity consumption resulting from measures adopted by a Distributor to maximize its new or existing distribution infrastructure (excluding general plant and fixtures) towards a Distributor’s CDM Target.
- Climate Change and EVs: examine and provide guidance to Utilities with respect to integrating cost-effective opportunities for climate change adaption into their planning and operations and identify steps for pursuing cost-effective opportunities for electricity distributors to facilitate access to residential smart charging for EVs.
- Innovation: take further steps to encourage innovation in the electricity distribution sector and raise the profile of Utilities’ innovation plans.
The LTEP reflects the Ontario government’s goals to cut costs across the electricity sector, scale back procurement of new generation while continuing to support renewables, continue to emphasize conservation and demand management, spur innovation among LDCs and focus on Market Renewal. With the release of the LTEP, the government has sought to balance the various forces at play in the Ontario electricity sector while reducing projected electricity cost increases for residential and commercial consumers.
Please contact any of the lawyers in BLG’s Electricity Markets Group if you have any questions or require further information.