On March 9, 2015 the Hon. Bob Chiarelli, Minister of Energy, delivered a keynote address to the Electricity Distributors Association (“EDA”) where he made important remarks about key policy issues impacting the Ontario electricity distribution sector.
The Minister indicated that the 2015 provincial budget (the release date is likely to be in late April or early May) would contain decisions about removing various barriers to the consolidation of the distribution sector. As he stated, “we need to take long, hard look at the departure tax and the transfer tax” that stand in the way of meaningful consolidation and reduce or eliminate these barriers.
The Minister also indicated that the Premier’s Council on Government Assets (“Clark Panel”) has challenged the government to re-evaluate its ownership structure of Hydro One. In media reports after his presentation, the Minister indicated that the government is considering an initial public offering of between 10-15% of shares of Hydro One and possibly larger share offerings in the future. At this point, however, no decisions have been made by the government.
The Minister posed the following questions related to the structure and ownership of electricity distribution utilities:
- Does the province need to be in the distribution business?
- How can ownership changes drive meaningful transformation and renewal of the distribution sector?
- Do municipal governments need to be in the distribution business?
The Minister made his view clear that the current structure has enshrined many inefficiencies that have disadvantaged electricity ratepayers and the time to change is now. He also indicated that the 2015 budget will contain decisions related to the ownership structure of Hydro One and various policy decisions to drive sectoral transformation. He believes establishing a more efficient distribution sector will deliver various benefits to electricity customers, chiefly lower rates.
The Minister reiterated the government’s position that it will not legislate forced consolidation of electricity distributors; however, his speech was very clear, that the province wants the sector to forge ahead with voluntary consolidation.?
Conservation and Demand Management
The Minister also indicated that Conservation and Demand Management programs (“CDM”) for Ontario’s distribution utilities will continue to be an integral part of the strategy of delivering value and energy savings to customers. He mentioned several municipal utilities and their innovative CDM programs and how the sector needs to expand these programs to reach every electricity customer.
The Minister announced the launch of the “Conservation First Implementation Committee” (“Committee”) co-chaired by Chris Tyrell of Toronto Hydro and Terry Young of the Independent Electricity System Operator (“IESO”). This committee will provide support and advice to other local utilities in designing CDM programs that can meet their regulatory requirements.
Ontario Clean Energy Benefit and New Low Income Programs
The Ontario Clean Energy Benefit program which provided rate relief to Ontario’s electricity consumers will be ending January 1, 2016. To replace this program, the government, working with the Ontario Energy Board (“OEB”), is developing a new initiative called the Ontario Electricity Support Program (“OESP”) that will provide support directly to the bills of eligible low-income electricity consumers after December 31, 2015. The details will be announced in the provincial budget.
In addition, the Minister stated that the Debt Retirement Charge will be removed from residential consumers’ bills two years ahead of schedule.
The Minister’s speech suggest that the Ontario Government is very serious about promoting consolidation in the electricity distribution sector and is actively considering its options with respect to future ownership of Hydro One.