Introduction

On June 2, 2015 Minister Bob Chiarelli tabled Bill 112, Strengthening Consumer Protection and Electricity System Oversight Act in the Ontario legislature that will impact the businesses which LDCs and municipally-controlled affiliates may undertake. The Act aims to increase the powers of the Ontario Energy Board (OEB) and enhance consumer protection for Ontario’s ratepayers. The Minister signalled these changes when he spoke at the 14th Ontario Power Summit on May 12. In his keynote address, Minister Chiarelli highlighted his Government’s intention to implement a number of recommendations coming out of the Premier’s Advisory Council on Government Assets. In so doing, he framed the proposed changes and expanded legislative tools contained in Bill 112 as necessary complements to the Government’s policy goals. The Act would amend the Ontario Energy Board Act, 1998 (OEBA) to strengthen the OEB’s role, and the Energy Consumer Protection Act, 2010(ECPA) to augment consumer protection when it comes to electricity retailing and gas marketing.

Changes To The Ontario Energy Board Act, 1998

Bill 112 proposes the following changes to the OEBA:

  • Increased scope for LDC affiliates to expandbusiness activities: Subject to some limited exceptions (including owning and operating a renewable energy generation facility that is less than 10MW), an LDC must currently organize their affairs by using affiliates to engage in certain business activities outside of transmitting or distributing electricity. Even then the activities an affiliate of an LDC may undertake is currently limited by the application of s. 73 of the OEBA. In this regard, Bill 112 proposes to repeal s. 73 which limits the types of business activities a municipally- controlled distributor’s affiliates can undertake. This will create opportunity for LDC affiliates looking to expand their business activities into new areas.
  • Increased scope for LDCs to expand businessactivities: In addition, a proposed amendment to 71 would enable the OEB to authorize a transmitter or distributor to directly carry on a business activity other than transmitting or distributing electricity. It is unclear at this stage what test the OEB would apply in determining whether or not to authorize or deny an LDC’s new business activity. Will the OEB adopt a “no harm” test similar to the test currently used by the OEB to assess proposed mergers and acquisitions or will some other test apply? Legal certainty surrounding the OEB’s approach to s. 71 applications would be welcome. This also raises a key question as to whether an LDC would be allowed to undertake a new business activity directly (with s. 71 approval) or would be required to use an affiliate.
  • Enhanced oversight of utility transactions:In light of the Government’s focus, as set out in the April 23, 2015 budget, on broadening the ownership of Hydro One and encouraging voluntary consolidation of LDCs, particularly those with fewer than 30,000 customers by reducing tax burdens, the Act is proposed to be changed to require distributors to maintain their head office and records in Ontario. These changes would be implemented through the addition of s. 58.1, pertaining to head offices, and  an amendment to s. 70 requiring certain records be kept in the province. OEB oversight would be further enhanced by amendments to subsection 86(2), lowering the threshold for OEB review of a transaction from 20% control of voting securities of a transmitter or distributor to 10%.
  • Expanded OEB emergency powers: The OEB’s emergency powers currently apply to distributors only. However, in the wake of the east-west tie designation proceeding and the introduction of new entrants as developers and (eventually) owners and operators of Ontario’s transmission system, an amendment to s. 59 would expand the OEB emergency powers to include transmitters. This power could be used by the OEB if the OEB determines that the transmitter has failed to meet certain reliability or other prescribed standards.   In addition, s. 59.1 will enable the OEB to appoint a supervisor where the OEB determines that a distributor or transmitter has failed, is unlikely or is unable to meet its financial obligations or certain reliability standards. A supervisor would then oversee the management of a transmitter or distributor and provide reports and information to the OEB whereby the OEB could then use the supervisor’s recommendations as conditions of the transmitter or distributor’s licence.
  • Enhanced powers for Cabinet to prioritize critical transmission infrastructure: Section 96.1 would  be added to enable the Lieutenant Governor in Council to declare through an Order in Council that the construction, expansion, or reinforcement of certain transmission lines is needed as a priority project. Examples could include the grid connection of Ontario’s remote First Nation communities, or a transmission link to the Ring of Fire.
  • Increased penalties for contravening enforceableprovisions: Maximum penalties for contravening enforceable provisions would be increased by an amendment to ss. 112.5(3). The OEB would not be able to set an administrative penalty above the amount the person would be liable for under s. 126 (“Offences”) for the contravention, but the amount could be increased to equal the monetary benefit that resulted from the contravention. In addition, ss. 126(3) would be amended to increase the maximum fines payable by individuals for first offences under the Act from $50,000 to $100,000, and from $150,000 to $300,000 for subsequent offences. Likewise, ss. 126(4) would be amended to increase maximum fines payable by corporations from $250,000 to 1,000,000 for first time offences, and from $1,000,000 to $2,000,000 for subsequent offences.
  • Facilitation of information sharing: An amendment to ss. 111(1) would enable the OEB to enter into an information-sharing agreement with the Electrical Safety Authority, notwithstanding any other confidentiality restrictions in the Act.
  • Expansion of director duties: Section 125.2 currently sets out the duties of directors of electricity or gas marketers; it would be amended to include the directors of transmitters, distributors, and unit sub-meter providers. The change should be taken into consideration by directors of LDCs as they are expressly required to take such measures as necessary to ensure compliance with the Ontario Energy Board Act, 1998 and the Energy Consumer Protection Act, 2010.

Increasing Consumer Protection

In addition to enhancing the powers of the OEB, Bill 112 proposes amendments to both the EnergyConsumer Protection Act, 2010 (ECPA) and the OEBA to strengthen consumer protection in the industry. The following list outlines these proposals:

Changes to the ECPA:

  • Enhanced powers to set pricing requirements: Currently, the Lieutenant Governor in Council   may prescribe pricing requirements in respect of electricity retailers. An amendment to s. 9 would expand this power to include gas marketers. An amendment would also give the OEB the power to determine how an electricity retailer or gas marketer determines the prices it charges for electricity and gas.
  • Prohibition against door-to-door sales byenergy retailers and gas marketers: Subsection 9.1(1) would prevent electricity retailers and gas marketers from selling energy retail contracts to a consumer at the consumer’s home. Any contract formed in contravention of ss. 9.1(1) would be deemed void under ss. 9.1(2). These changes are in response to recommendations made by the OEB in a May 28 report to Minister Chiarelli.1 While door-to-door sales would be banned, energy retailers and gas markets are still permitted to conduct door-to-door marketing activities. However, ss. 9.2(1) would make marketing activities subject to regulations made by the Lieutenant Governor in Council.
  • Extended cooling-off period: Subsection 19(1) would be amended to extend the cooling-off period from 10 days to 20 days after entering into a contract.

Changes to the OEBA:

  • Strengthening consumer advocacy: Consumer education would be promoted through the addition of s. 1.1. Another addition, ss. 4.4.1(1), would require the OEB to establish a process for consumer representation in OEB proceedings.

Other Updates: New Regulations

Finally, there has been an update with respect to two new regulations under both the Electricity Act, 1998, and the OEBA.

First, Ontario Regulation 132/15 under the ElectricityAct amends Regulation 160/99 by adding a definition  of “service” for the purpose of ss. 29.1(1). Subsection 1(7) states that “service” includes, but is not limited to, on-bill financing for electricity conservation and load management measures. Second, Ontario Regulation 131/15 under the OEBA amends Regulation 161/99 in the same way, adding the same definition of “service” to ss. 1(2) for the purpose of ss. 71(2) of that Act. Both regulations came into force on July 1, 2015.

Conclusion: Next Steps

Bill 112 passed first reading just prior to the legislature’s summer break. As a result, we do not anticipate further developments until the legislature returns in October.