Background

On December 20, 2007 the Ontario Ministry of Energy released the Report of the Agency Review Panel on Phase II of its Review of Ontario's Provincially-Owned Agencies. At the same time the Minister of Energy issued a press release and sent a letter to the agencies involved indicating how he plans to move forward with the Report's recommendations. The Panel was chaired by James Arnett and the agencies that were under review are Ontario Power Generation Inc. (OPG), Hydro One Inc. (Hydro One), the Independent Electricity System Operator (IESO), the Ontario Power Authority (OPA), and the Ontario Energy Board (OEB).

In June of 2007 the Ministry released the Phase I Report of the Agency Review Panel which addressed executive compensation at Ontario's electricity agencies. Both reports are available on the Ministry of Energy's website at  www.energy.gov.on.ca under Electricity/Agency Review Panel.

The Agency Panel Review Report

The terms of reference for the Phase II Report required the Agency Review Panel to:

  • Review the roles and relationships among the five provincial agencies with a view to continuing improvements in operational performance, assessing potential overlaps between the agencies, and minimizing costs and maximizing effectiveness for Ontario consumers; and
  • Examine human resource needs facing the sector and provide advice on recruitment, training and related strategies to address future needs.

The 44-page Report includes six appendices among them;

  • A list of the organizations asked to provide input and the groups with whom the Panel met;
  • A list of the current provincial and federal approval requirements for generation and transmission projects;
  • A review of comparative approvals processes;
  • Suggested principles for a provincial protocol on reviewing electricity projects;
  • A summary of the cost efficiency activities provided by the Agencies; and
  • A 63-page report entitled "Human Resource and Skill Needs facing the Ontario Electricity Sector" by the Electricity Sector Council (a not-for-profit corporation dedicated to the development of the electricity industry workforce in Canada). It was engaged to provide information about the supply and demand profile for labour in the electricity sector in Ontario and the readiness of the Ontario educational sector and the electricity agencies to meet future workforce demands.

Energy Minister's Reaction to Agency Review Panel Report

In the Ministry of Energy Press Release Minister Gerry Phillips stated that the recommendations in Phase II of the Agency Review Panel Report will help "strengthen Ontario's long-term plan for a secure, reliable and affordable electricity supply."

He added that: "Our agencies have helped put Ontario's electricity sector back on track, and they will all continue to play a vital role. Now is not the time to implement institutional change in the sector. At the same time, the report makes prudent and helpful suggestions for the future as the sector develops. We'll be taking their advice to heart as we move forward and seek out appropriate opportunities for streamlining."

The key recommendations of the Agency Review Panel cited in the press release were:

The 44-page Report includes six appendices among them;

  • Ensuring a fulsome, integrated process among agencies for the approval of electricity projects;
  • Continuing the independence of Ontario's Chief Energy Conservation Officer, to ensure regular reports on Ontario's conservation progress;
  • Creating new tools to ensure a continued and growing supply of expertise and skilled workers to meet the needs of Ontario's energy future; and
  • Continuing to facilitate the consolidation of local distribution companies, which deliver electricity to homes and businesses.

The press release indicated that Minister Phillips is committed to pursuing quickly the need to address the industry's human resources challenge.

In his letter to each Agency Chair, the Minister provided specific comments on overlap and duplication, approvals processes, OPG, local distribution companies, connection assessments and human resource skill needs. The Minster emphasized the need for stability and that any change should only be made when it is reasonable to do so. Although he agreed with the Panel's recommendation to reduce areas of overlap and duplication with regard to conservation and demand management (CDM), he did not specifically address the recommendation with respect to redistributing the CDM functions of the OPA; nor did he address the recommendation that the balance of the OPA functions be combined with those of the IESO.

Although the Minister noted the need for expeditious approval of near-term projects identified in the initial Integrated Power System Plan (IPSP), he did not comment on the specific Panel recommendations for a single integrated approvals process as set out in the Phase II Report's appendices. He did, however, indicate his agreement with the recommendation to continue policies that facilitate the consolidation of local distribution companies. The Minister also agreed with the Panel's recommendations concerning "new tools to develop a future pool of talented energy professionals" and he plans to discuss them with the Minister of Training, Colleges and Universities.

The Minister pointed out that the government continues to work very closely with OPG "to provide ongoing clarity with respect to its future role in the context of the government's longer-term energy plan, including its role in new generation." He also agreed with the recommendation for more cooperative efforts regarding connection assessments and asked the IESO and Hydro One to begin developing a uniform approach to connection assessments to reduce any existing overlap, duplication or inefficiencies.

Consolidated Recommendations of Agency Review Panel

The Phase II Report provided the following consolidated recommendations:

  • That, when it seems reasonable to the Minister to do so, the CDM functions of the OPA be redistributed as follows:
  1. responsibility for designing and administering conservation programs, education and advocacy and assisting in the development of standards for electricity efficiency be transferred to the Ministry of Energy; and
  2. the Chief Energy Conservation Officer be made an officer with sufficient independence to ensure confidence in the numbers being filed with the Minister, detailing Ontario 's progress in meeting its goals relating to the development and implementation of electricity conservation and load management measures.
  • That, when it seems reasonable to the Minister to do so, but probably not before the OEB has completed its current review of the initial IPSP, the balance of the functions of the OPA be combined with those of the IESO into a combined agency.
  • That Hydro One and the IESO work together to develop a uniform approach to connection assessments that is consistent with the requirements of the Transmission System Code in order to reduce overlap, duplication and inefficiencies, for the benefit of existing and potential consumers.
  • That, to ensure the timely consideration of urgent projects set out in the IPSP or otherwise, the government establish an understanding or protocol among its various ministries and regulatory tribunals to create, on a temporary basis and using existing legislation, a single integrated approvals process for electricity projects based upon existing legislative authorities.
  • That the government enact legislation that would create a single integrated approvals process for electricity projects on a permanent basis.
  • That the Minister of Energy provide greater clarity as to OPG's role, particularly with respect to:
  1. new generation other than hydroelectric;
  2. its ability to enter into power purchase agreements; and
  3. whether it should be fully, instead of partially, regulated by the OEB.
  • That provincial policies to facilitate the consolidation of local distribution companiess be continued.
  • That the government of Ontario establish an Ontario Electricity Sector Council that would jointly report to the Minister of Energy and the Minister of Training, Colleges and Universities. Members of the Council should include representatives from employers, labour and the education and training bodies. The Ontario Electricity Sector Council could undertake several important activities, including:
  1. Ensuring better and more targeted support for laid-off workers, particularly from the manufacturing sector, who need retraining to move into electricity sector jobs.
  2. Raising the sector's profile and improving its appeal to students, parents and the broader public.
  3. Developing a strategy to expand the labour pool by focussing on under-represented groups.
  4. Analyzing in more depth why young women appear to be turning their backs on careers in engineering.
  5. Coordinating with other provincial bodies to monitor and improve the capacity of the electricity sector to meet the province's needs for reliable power.
  6. Coordinating with other provincial bodies to monitor and improve the capacity of the construction sector to meet the province's public infrastructure needs.
  7. Ensuring that agencies' investments in education and outreach to increase the available workforce are considered prudent expenditures for the purposes of rate hearings before the OEB.
  8. Developing better information on the retention rates at universities and colleges and the success of apprenticeship programs in Ontario and, together with the results from annual performance reports, addressing specific concerns that these data may reveal.

The Agency Review Panel also commented on certain topics but did not make specific recommendations with respect to them. Pointing out that it would exceed its mandate to make specific recommendations with regard to the duty to consult First Nations and Metis, the Panel noted, however, that a provincial protocol to ensure consistency in carrying out the consultation would be helpful. The Panel also reviewed increases in the agencies' total operating, maintenance and administration expenses since the break-up of Ontario Hydro and concluded that the increases did not have a significant impact on the rates paid by consumers in comparison to the many other factors involved in setting prices at the retail level between 1998 and 2006.