INTRODUCTION

Two key energy policy developments have been initiated by the Ontario government recently. The first development concerns are the announced changes to the government’s Integrated Power System Plan (IPSP). The second relates to a proposed regulation to amend O.Reg. 492/04 under the Electricity Act 1998 by changing the global adjustment cost recovery mechanism (Global Adjustment). This bulletin provides background information on both of these energy policy developments that may be of interest to BLG’s clients.

THE IPSP

The Ontario Power Authority (OPA) first introduced the IPSP in June 2006. Given a 20 year planning horizon, the purpose of the IPSP was to identify the conservation, generation and transmission investments that are required in Ontario over the next three to five years, undertake the preparatory work for the subsequent five years, and chart the broad directions for the development of the power system in the balance of the planning period. The IPSP was to reflect the electricity sector goals established by the Ontario government through programs and activities set by the Ministry of Energy through various directives to the OPA. Once the Plan is completed, the OPA submits it to the Ontario Energy Board (OEB) for approval. In developing the IPSP, the OPA is required by regulation to consult with consumers, distributors, generators, transmitters and other stakeholders that have an interest in the electricity system to ensure their priorities and concerns are identified in the Plan.

LEGISLATIVE FRAMEWORK

The Electricity Act, 1998 and regulations set out the requirements of the IPSP. The OPA must develop and submit a plan to the OEB. The IPSP is to be for a 20 year period and that an update of the plan is filed every three years with the OEB. The Minster of Energy has the authority to issue directives to the OPA in respect of the goals to be achieved during the period of the plan. The legislation mentions goals such as the future supply mix and generation technologies, increases in generation capacity from renewable sources, the development and implementation of conservation measures, and the replacement of coal fired generation. The legislation requires the OEB to review and approve the IPSP in terms of their cost effectiveness, economic prudence and its compliance with directives from the Minister of Energy.

The regulation also sets out detailed requirements for the IPSP related to public consultation, conservation measures, use of natural gas in high value applications and environmental assessments.

SUPPLY MIX AND CONSULTATION CHANGES TO THE IPSP

In September 2008, the former Minister of Energy issued a directive to the OPA to amend the IPSP in respect of establishing new targets for the amount and diversity of renewable energy in the supply mix. In addition, the directive indicated that the IPSP should examine the improvement of transmission capacity in Northern Ontario and other regions, converting coal to biomass energy, accelerating the achievement of conservation targets and the deployment of smart meters, and the enhancement of consultation with First Nations and Metis communities. As this directive made clear, other aspects of the original 2006 supply mix directive and the IPSP were to remain intact and the OPA was required to revise and resubmit the existing IPSP to the OEB within six months.

The OPA has not submitted a revised IPSP to the OEB. With the introduction of the Green Energy and Green Economy Act in 2009 and the award of contracts under its Feed-In-Tarrif Program, a significant amount of new renewable generation is expected to be built. The Ontario government also entered into agreements with a consortium led by Samsung in 2009 to allocate specific transmission capacity to it in response to the consortium’s commitments to make investments in Ontario. These developments have caused many electricity sector participants to seek clarity in the OPA’s planning process and status of the IPSP.

ANNOUNCED CHANGES TO THE IPSP

The latest changes to the IPSP announced on September 20, 2010 include the following:

  • The IPSP will be renamed the “Long Term Energy Plan” (LTEP);  
  • A new public, First Nation/Metis and industry consultation process will commence immediately;  
  • A new Supply Mix directive that flows from the new consultation process will be posted to the Environmental Registry for its own comment period. Once this directive is finalized, it will inform the OPA in revising the LTEP;  
  • The revised LTEP will then be reviewed by the Minister of Energy and then referred to the OEB for review;  
  • The timeline for final approval of the LTEP will be 2011.  

A number of questions have been posted to the Ministry of Energy’s web site (www.mei.gov.on.ca) that the province is posing as part of the development of the LTEP. The public is invited to comment through the website or consultation sessions that will be announced shortly:  

  1. After several years of stable rates, electricity prices for Ontarians are increasing now due to investments in infrastructure and new generation. How should increased costs to Ontarians be weighed against other goals in power system planning like modernizing infrastructure, building new generation and increasing renewable energy production while phasing out dirty coal generation?  
  2. How do you think the electricity demands of families and businesses will change over the next 20 years in Ontario?  
  3. What role should renewable forms of energy like hydro, solar, wind and biomass play in Ontario’s future supply mix?  
  4. What type of generation should replace dirty coal in Ontario’s supply mix?  
  5. What role should natural gas play in Ontario’s future energy supply?  
  6. What role should nuclear power play in Ontario’s future supply mix?  
  7. What is the appropriate and cost effective level of investment in transmission and distribution – the infrastructure that carries power from stations and delivers it to our homes and businesses – to target in our future power grid? How should we balance the needs of cost-effectiveness with ensuring appropriate build-out?  
  8. Are Conservation and Demand Management (CDM) programs, that provide tools to help manage bills and avoid new system costs, important to Ontario’s energy future? Are there ways to enhance them?  
  9. What key elements do you think should be considered to ensure that Ontario’s energy system remains reliable, sustainable, clean and cost-effective for our children and grandchildren?