2018 saw many interesting developments in the energy sector, both in Ontario and across Canada. The topic that got the most reads on Energy Insider in 2018 was the changes implemented by Ontario’s new provincial government. Other widely-read topics included developments at the Ontario Energy Board, the Trans Mountain Pipeline, Nova Scotia’s struggling tidal generation plans and B.C.’s consideration of the rate regulation of EV charging. Below is a look back at the top Energy Insider posts of 2018.
1. New Ontario Government Cancels Cap and Trade Program
In March 2018, we wrote about the sellout of all current allowances in Ontario’s first joint cap and trade auction involving Ontario, Quebec and California. By June 2018, we were covering the newly-elected provincial government’s first steps to cancel cap and trade. On June 15, 2018, then Premier-designate Doug Ford announced “an end to Ontario’s Cap-and-Trade Carbon Tax.” According to the news release, “cabinet’s first act following the swearing-in of [Mr. Ford’s] government will be to cancel Ontario’s current cap-and-trade scheme, and challenge the federal government’s authority to impose a carbon tax on the people of Ontario.”
By the end of July, the government had introduced Bill 4, referred to as the Cap and Trade Cancellation Act, 2018. Although the focus of the Cap and Trade Cancellation Act, 2018 was on the wind-down of the Cap and Trade program, the legislation also included important provisions related to how Ontario will address GHG emissions and climate change in the future. First, the government will be required to “establish targets for the reduction of greenhouse gas emissions in Ontario.” Second, the Minister of Environment, Conservation and Parks will (with Cabinet approval) prepare a “climate change plan.” Consultation on the “Made-in-Ontario Climate Change Plan” started in October.
Having eliminated the previous government’s key climate change policy, the new provincial government also brought a court challenge against the federal government’s carbon pricing plan. Starting in 2019, under the federal plan, provinces without a carbon pricing strategy are subject to the federal carbon pricing backstop. In the fall of 2018, the federal government provided further details of the carbon pricing system for provinces without at-home pricing measures, including Ontario, New Brunswick, Manitoba and Saskatchewan. At the same time, Ontariojoined with Saskatchewan to bring a reference in their respective Courts of Appeal to challenge the constitutionality of the federal government’s carbon pricing policy. Ontario’s reference is scheduled to be heard in April 2019.
2. More Energy Policy Changes from the New Provincial Government in Ontario
In addition to cancelling cap and trade, the new provincial government also moved immediately to cancel renewable energy projects under the FIT and LRP Programs that, though approved, had not yet received a notice to proceed. At the same time, the government also moved to cancel the White Pines Wind Project, a previously-approved 9-turbine wind facility under construction in Prince Edward County. The White Pines Wind Project Termination Act, 2018 barred any person from bringing a claim arising from the termination of contractual or other rights related to the White Pines Project. In a news release issued on July 13, 2018, the Government of Ontario announced that the cancellation of the FIT and LRP projects will save Ontario ratepayers $790 million and stated that the legislation “will protect hydro consumers from any costs incurred from the cancellation.”
Another significant cancellation was the repeal of the Green Energy Act, 2009 and regulations. The Green Energy Act, 2009 was enacted ten years ago to expand renewable energy production, encourage energy conservation and create jobs in the renewable energy sector. In addition to repealing the Green Energy Act, 2009, Bill 34, Green Energy Repeal Act, 2018, also included changes to the Planning Act and Environmental Protection Act that increase the power of the province and municipalities to reject renewable energy projects.
3. Ontario Energy Board Developments
Two developments at the Ontario Energy Board (OEB) were in the top read posts of the year. The first was the OEB’s confirmation of the rejection of Hydro One’s proposed acquisition of Orillia Power Distribution. The second was the OEB’s approved increased service charges from distributors to energy retailers and customers.
On August 23, 2018, the OEB issued a Decision and Order dismissing a motion to review and vary the OEB’s prior decision denying Hydro One’s application to purchase the shares of Orillia Power Distribution Corporation (Orillia Power). The OEB’s April 12, 2018, decision on this MAADs (Mergers, Acquisitions, Amalgamations and Divestitures) Application (the MAADs decision) found that Hydro One and Orillia Power had failed to establish that there will be no harm to Orillia Power ratepayers arising from the proposed transaction. Specifically, the OEB concluded that Hydro One had failed to establish that its cost structures will be no higher than Orillia Power’s absent the transaction (even taking into account efficiencies from the acquisition).
On November 29, 2018, the OEB issued its Report on Energy Retailer Service Charges. The OEB concluded that the current retail service charges (RSCs) from electricity distributors to electricity retailers and their customers need to be increased so that all of the distributors’ costs are recovered. Otherwise, existing ratepayers will effectively be subsidizing the retailers’ activities. While the OEB did not see the need to increase the current RSCs from gas distributors to gas retailers, one charge will be added. The OEB decided to undertake a review of the RSCs because these had not been updated for more than 15 years.
4. Energy Storage
Energy storage continued to be an area of interest for readers in 2018. We reported on recent developments in Canada, the United States and beyond in our post on Energy Storage Developments in the Last 12 Months. Experts around the world continue to believe that energy storage paired with renewables at the grid level and behind-the-meter are the way forward in an era of rising electricity costs and peak demand, aging infrastructure and the growing need for carbon-free solutions. Furthermore, advances in battery technology will have a significant impact on the industry and are likely to make energy storage even more competitive in the marketplace. GTM Research reported energy storage as one of the top ten utility regulation trends in the United States in 2018. It reported that energy storage is increasingly being recognized as a valuable and necessary asset for a 21st century grid. We will continue to monitor energy storage developments in the year ahead.
5. Other Canadian Jurisdictions
Our top posts included developments in Nova Scotia’s tidal generation project and British Columbia’s consideration of regulating EV charging rates.
In Nova Scotia, the province’s plans for tidal generation suffered a setback when one of the key proponents declared bankruptcy. Cape Sharp Tidal was a joint venture between Ireland-based OpenHydro and the parent company of Nova Scotia Power (Emera), created to deploy two 2MW tidal turbines in Minas Passage at the Fundy Ocean Research Centre for Energy (FORCE) test site. The project was intended to test the viability of new in-stream tidal energy technology.
On July 26, 2018, the main project proponent, OpenHydro, filed for bankruptcy protection, indicating that they will no longer pursue tidal generation projects. Subsequently, Emera announced that it was withdrawing from its involvement with the project, indicating that “[w]ithout support from the technology developer, OpenHydro, to operate and maintain the technology and the turbine, we do not believe that there is further value in pursuing this project for our business.”
Previously, the Nova Scotia government has stated that the province aims to be a global leader in the emerging industry of marine renewable energy and has indicated an ultimate goal of 300 MW of generation from tidal power.
In British Columbia, the Utilities Commission issued its Phase I Report from its Inquiry into the Regulation of Electric Vehicle (EV) Charging Services. The BCUC found that the public EV charging market does not exhibit monopoly characteristics and economic regulation is not required to protect consumers. The BCUC recommended that the B.C. government issue an exemption with respect to the BCUC’s regulation of EV charging services, but retain oversight of safety. In Phase II of the Inquiry, the BCUC plans to look at the role of non-exempt public utilities in the EV charging market. Phase II is expected to start in early 2019.
6. Trans Mountain Pipeline
The trials and tribulations of the Trans Mountain Pipeline continued to be a widely-read topic in 2018. Early in the year, British Columbia proclaimed regulations that would stop pipeline companies from increasing bitumen shipments. The justification for the new regulations was to give the province time to undertake studies and implement appropriate standards for spill response plans. The practical effect of any such regulations, however, would be to stop the planned expansion of the Trans Mountain pipeline.
On April 8, 2018, Kinder Morgan Canada Limited announced that it was “suspending all non-essential activities and related spending on the Trans Mountain Expansion Project.” Kinder Morgan noted that while it has the support of the federal, Alberta and Saskatchewan governments for the project, it faced continued active opposition from the government of British Columbia. Kinder Morgan was not prepared to continue to fund the project in the face of this risk.
On May 29, 2018, the Government of Canada announced a $4.5 billion deal with Kinder Morgan to purchase the Trans Mountain pipeline and related terminal assets “in order to secure the timely completion” of the project.
On August 30, 2018, the Federal Court of Appeal weighed in and released its decision in the matter of Tsleil-Waututh Nation et al. v. Attorney General of Canada et al. In this decision, the court quashed Cabinet’s approval of the Trans Mountain pipeline expansion project. The court heard a number of applications for judicial review in October 2017. The applicants included several First Nations, including the Tsleil-Waututh Nation, the Cities of Burnaby and Vancouver, and two non-governmental actors.
This case involved two discrete matters that were consolidated into one hearing. The first matter was for the judicial review of the report from the NEB, which recommended that Cabinet direct the NEB to issue the certificate of public convenience and necessity. The second matter was for the judicial review of the decision of Cabinet to accept the recommendation of the NEB, and to issue the Order in Council directing the NEB to issue the certificate of public convenience and necessity. The first matter was dismissed, but the court granted the applications for judicial review of the decision of Cabinet.
The court found that the report of the NEB was unacceptably flawed in that it wrongly narrowed the scope of its environmental assessment by excluding the effect of project-related shipping of petroleum at the pipeline’s destination. Since the NEB report forms the basis of the Governor in Council’s decision on the matter, Cabinet’s decision to direct approval was found unreasonable. The court also found that the federal government failed to adequately discharge its constitutional duty to consult with First Nations.
The decision in Tsleil-Waututh Nation was seen as a partial victory for opponents to the pipeline. However, the fact that the Government of Canada is now the owner of the pipeline adds an additional dimension to the matter. Unlike a private actor, the Government of Canada has legislative tools at its disposal to ensure the project’s timely execution. Whether or not the Government of Canada chooses to use legislative tools to usher the project forward remains to be seen.
Stay tuned to Energy Insider in 2019 as we following these and all of the exciting developments in the energy sector in Ontario and beyond.