Introduction

On April 22, 2015, Ontario's Minister of Energy Bob Chiarelli issued a directive to the Independent Electricity System Operator ("IESO") regarding procurement of electricity products contemplated in the province's latest Long-Term Energy Plan (the "LTEP") which was released on Dec. 2, 2013. It is the latest in a series of directives that the Minister has issued to the IESO and its predecessor the Ontario Power Authority.

Summary of the Directive's Key Points

Imports from Quebec

The LTEP contemplated the potential for clean imports from jurisdictions such as Quebec, which ultimately led to the IESO and HQ Energy Marketing Inc. ("HQEM") signing a Memorandum of Understanding ("MOU") that was endorsed by Ontario and Quebec at a November 2014 joint Cabinet meeting. The MOU sets out the basis for an agreement for a seasonal electricity capacity sharing agreement aimed at making power more affordable and reliable in each Province. In addition, Ontario and Quebec agreed to explore other joint opportunities, including exploring the potential for agreements related to the provision of energy, capacity, regulation, black start and operating reserve from clean energy sourced in Quebec ("Electricity Products")

Consistent with the MOU, this latest ministerial directive instructs the IESO to negotiate and enter into a seasonal capacity sharing agreement with HQEM (and to try to do so by June 1, 2015), and to investigate other beneficial opportunities to obtain Electricity Products from Hydro-Quebec and other market participants.

Review of Recent Procurements

Procurements launched under the LTEP include Combined Heat and Power Standard Offer Program 2.0 ("CHPSOP 2.0"), Large Renewable Procurement ("LRP"), Hydroelectric Standard Offer Program ("HESOP") and Energy Storage.

The ministeral directive states that due to the province's positive supply outlook, the IESO is well-positioned to review the outcomes of recent procurements in order to incorporate the lessons learned from such procurements and re-evaluate system needs.

Accordingly, the IESO is directed to undertake the following:

  1. CHPSOP 2.0  - Report back to the Minister on the assessment of the framework for non-utility generators contracting by Sept. 1, 2015, instead of July 1, 2015 which was the deadline outlined in the Dec. 19, 2014 directive to the IESO regarding non-utility generator projects. This is to allow the report to capture results and lessons learned from the initial CHPSOP 2.0 contract awards as well as recommendations for a future CHPSP 2.0 application window.  The IESO has been directed to postpone the second application window of CHPSOP 2.0 until such time as further Minister's direction is provided.
  2. LRP – Upon completion of the LRP 1 process, engage with municipalities, Aboriginal communities and other stakeholders, so that learnings and opportunities for improvement from LRP 1 can be taken into account in subsequent LRP procurement(s). Conclusion of such engagement process is a pre-requisite to the issuance of the Request for Qualification for LRP II .
  3. Review the outcomes of the 50MW energy storage procurement and incorporate learnings resulting from such process into a March 1, 2016 report to the Ministry of Energy on options for integration of energy storage into Ontario's electricity market and market-based procurements.