Ontario's Legislated Terribly Energy Plans

"The law is an ass," Dickens wrote - anticipating the Electricity Act in Ontario.

In writing on how the IESO's stakeholder-infested processes are working to prevent costs from being controlled I stated:

There are external, legislated, and political reasons for the IESO’s focus on efficiency, which seem to corrupt all analysis coming from it.

As with the global adjustment debacle, the architect of the dysfunctional law is Dwight Duncan - although neither vehicle would likely exist in their current form if he had remained as minister of energy long enough to see the abuse of ratepayers his policies have facilitated.

Prior to 2005, the purposes of The Electricity Act were:

(a) to facilitate competition in the generation and sale of electricity and to facilitate a smooth transition to competition;
(b) to provide generators, retailers and consumers with non-discriminatory access to transmission and distribution systems in Ontario;
(c) to protect the interests of consumers with respect to prices and the reliability and quality of electricity service;
(d) to promote economic efficiency in the generation, transmission and distribution of electricity...

I've added some emphasis to illustrate changes in the stated purposes of the law that took effect in 2005 - changes which removed "facilitating competition" as the main purpose of the act and demoted other priorities behind requiring central planning, conservation, demand response, and the promotion of "cleaner energy":

a) to ensure the adequacy, safety, sustainability and reliability of electricity supply in Ontario through responsible planning and management of electricity resources, supply and demand;
(b) to encourage electricity conservation and the efficient use of electricity in a manner consistent with the policies of the Government of Ontario;
(c) to facilitate load management in a manner consistent with the policies of the Government of Ontario;
(d) to promote the use of cleaner energy sources and technologies, including alternative energy sources and renewable energy sources, in a manner consistent with the policies of the Government of Ontario;
(e) to provide generators, retailers and consumers with non-discriminatory access to transmission and distribution systems in Ontario;
(f) to protect the interests of consumers with respect to prices and the adequacy, reliability and quality of electricity service;
(g) to promote economic efficiency and sustainability in the generation, transmission, distribution and sale of electricity...

The stated purposes in the current version of the law are similar, although an "a.1" is added "to establish a mechanism for energy planning." This mechanism connects the IESO's planning outlook to long-term energy plans from a Ministry including energy.

The changes to the act made back in 2005 explain the IESO's lack of competency in operating a competitive market and related abandonment of the main cost savings promise from Ontario's last long-Term Energy Plan. Which brings me to putting the IESO's newest publication, the first Annual Planning Outlook, in the context of the current Electricity Act's "mechanism for energy planning."




Part II.2 of the current act is "Planning, Procurement, and Pricing", and it begins with section 25.29, "Long-term Energy Plans."

Long-term energy plans25.29 (1) At least once during each period prescribed by the regulations, the Minister shall, subject to the approval of the Lieutenant Governor in Council, issue a long-term energy plan setting out and balancing the Government of Ontario’s goals and objectives respecting energy for the period specified by the plan. 

Ontario Regulation 355/17 prescribes the period.

"Each subsequent long-term energy plan shall be issued within three years of the approval by the Minister of all implementation plans submitted under section 25.31 of the Act in respect of the preceding long-term energy plan, or, within three years of the issuance of the preceding long-term energy plan if no implementation plans were required to be submitted in respect of it."

The last LTEP was released in the fall of 2017, but it was February 2018 when the Minister approved of the IESO's implementation plan. The law requires the IESO, "to submit a technical report on the adequacy and reliability of electricity resources with respect to anticipated electricity supply, capacity, storage, reliability and demand and on any other related matters the Minister may specify." I expect the IESO's first Annual Planning Outlook will serve as the technical report kicking off a new LTEP process - which given the quality of that outlook would be unfortunate.

What is jokingly referred to as Ontario's electricity market is pathetic. This isn't entirely the market operator's fault, but it would be ridiculous to ascribe market expertise to that body. Following the removal of the facilitation of competition as the primary purpose of the Electricity Act in 2005 the supply exposed to market pricing dropped rapidly - from about 40% to less than 10% in 4 short years, and to essentially nothing 4 years later when remaining unregulated sites at the public generator (OPG) were provided regulated rates (and reimbursement for curtailment).

The IESO's latest planning outlook - which may advise the next LTEP - states, "Ontario’s diverse supply mix means the province is well positioned to meet future resource adequacy needs." That simply means they've read the act and recognize they'd be negligent if the current system couldn't "ensure the adequacy, safety, sustainability and reliability of electricity supply in Ontario." The next legislated purpose of the act is the promotion of conservation - which explains how "efficiency" overwhelms actual supply possibilities in the Annual Planning Outlook. The next requirement for "load management" explains how the Demand Response monster ate the IESO's proposed capacity market before it could grow.

Legislation isn't the only problem.

Another aspect of the original Electricity Act's original intent to facilitate competition was controlling market power, particularly at the dominant public generator. The current government is disinterested in preventing market power from being concentrated at the public generator (OPG). OPG has moved from not being able to pursue new gas-fired power plants a decade ago to owning nearly 50% of all contracted gas-fueled capacity on the IESO controlled-grid through recent purchases of all, or remaining portions of, Brighton Beach, Portlands, Halton Hills, and Oakville/Napanee generating stations (in addition to the Lennox site it has long owned).

If the government wants markets to deliver value in Ontario's electricity sector, it needs to roll back changes to the Electricity Act that replaced developing a market with pretending to operate one.