The Government’s plan to merge the Ontario Power Authority (the “OPA”) and the Independent Electricity System Operator (the “IESO”) moved forward with the introduction of the budget bill which includes legislation that would merge the two agencies.  If passed, the Bill would:

  • Merge the two agencies under the name IESO – suggesting more of a takeover than a merger;
  • Transfer all of the OPA’s statutory objectives and powers for planning and procurement to the IESO;
  • Grant the Government a power to make directions to the IESO in the same way as it had to the OPA, such as procurements, etc.  In fact, the IESO’s objects will now include a requirement to follow government directions; and
  • Grandfather existing procurement contracts.

The Government last proposed to merge the agencies just prior to former Premier McGuinty’s resignation and the dissolution of the Legislature.  The main differences between the previous proposal and the new Bill are that the previous proposal would have:

  • removed ongoing OEB review of integrated power system plans and procurement contracts while this Bill does not; and
  • required the IESO to conduct itself in a way that would not unduly disadvantage market participants or procurement contract holders – the new Bill removes the reference to procurement contract holders, so there is no protection on that front.

The legislated merger of the two agencies is not unexpected.  However, it does raise significant issues respecting inherent conflicts of interest between the same entity both operating the system while at the same time procuring electricity, managing contracts, and being subject to directive powers.  The challenges with these conflicts are more material than previously contemplated given the fact that the IESO has now taken on a more aggressive role with respect to proposed capacity markets and other initiatives.  The Bill contains no independent oversight process to address this conflict.  This is a serious inadequacy that should be addressed.