How Queen’s Park broke Ontario’s provincial electricity sector

Political meddling has undermined the province’s electricity sector.

This article first appeared in the Financial Post.

How did the Ontario power sector, once a boon to the provincial economy, become a burden? Over the last dozen years and more, the tried-and-true regulatory system that protected Ontario’s electricity consumers and the financial viability of the power sector as a whole have been systematically sidelined by politicians at Queen’s Park. Short-term political expediency has replaced the long-term planning needed for economic viability.

Ontario used to have a sensible review process that saw consumer and industry groups and their experts challenging official plans. In 2004, for example, the province passed legislation requiring its power planning agency — then known as the Ontario Power Authority (OPA) — to file, once every three years, a system supply plan to the Ontario Energy Board. The OEB would then assess whether the plan was “economically prudent and cost effective” after hearing from the various parties. The OPA did file a supply plan in 2007 but the government — hell-bent on pushing renewable energy and closing coal plants — summarily shelved it.

In 2009, the province further undermined its planning agency and regulator by passing the Green Energy Act, which offered rich rates to renewable energy generators. None of the province’s energy agencies was asked to review the lucrative rates, and for good reason. The rates were inordinately high, as the province’s auditor general pointed out years later.

In 2011, although the Ministry of Energy publicly directed the planning agency to again develop and submit a long-term plan to the OEB, it ensured that plan never saw the light of day. Instead, the ministry began releasing its own plans detailing what types and how much energy should be procured in Ontario. To date, no independent supply plan has been issued and reviewed by the OEB.

In 2016 the province ended the charade of having an “independent” planning agency by passing legislation that formally transferred all planning responsibilities to the Ministry of Energy. All planning is now overseen and rubberstamped by this ministry, not by the agencies created for that purpose.
The OEB, after losing its power to review system-wide energy plans and the rates offered to renewable generators, saw its other powers undermined. The government blocked it from doing a cost-benefit analysis of the power system’s rollout of so-called “smart meters,” which has cost $2 billion and counting. The government also blocked it — this time through legislation — from determining whether large transmission projects are necessary or cost-effective. Further, the government directed it to rubber stamp all transmission and distribution spending related to renewable energy — costs that are eventually passed on to consumers.

The province also used legislation to push through other major projects, including the $12.8-billion refurbishment of the Darlington nuclear plant, thereby exempting them from review at regulatory proceedings where their need and economic viability would be tested.

The toothlessness of today’s regulation can now be seen in the decision on whether the province should invest hundreds of millions of dollars in extending the operating life of the Pickering nuclear plant. When questioned in the legislature on the merits of that decision, the province replied that the OEB would decide whether the refurbishment represents good value for money. The OEB, in turn, denies responsibility, calling the Pickering refurbishment a “system planning” decision that should be made by the province’s planning agency. But the planning agency no long has power: The creation and approval of power system plans is done by the minister of energy.

Every agency — including the Ministry of Energy — that’s tasked with protecting the interest of ratepayers is pointing the finger of responsibility at someone else. Ratepayers will be left footing the bill.

This article first appeared in the Financial Post.

Brady Yauch is an economist and the executive director of Consumer Policy Institute.

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One thought on “How Queen’s Park broke Ontario’s provincial electricity sector

  1. This is an excellent article. It well explains the sickness of Ontario’s electricity policy. I can only hope that as electricity prices continue to escalate and jobs continue to move elsewhere the electorate will finally realize that electricity is a commodity to be delivered and priced with market forces, not by political fiat. Each successive political fix of the problems from the last political fix just makes it worse. More political interference = higher electricity prices.

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