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Publication

TITRE

Ontario's Electricity Conservation and Supply Task Force Releases Final Report

DATE

2 janvier 2004

EXPERTISE

Énergie

Energy Law Team

The Final Report of the Electricity Conservation and Supply Task Force ("ECSTF") was released on January 14, 2004.  The Final Report, entitled "Tough Choices: Addressing Ontario's Power Needs", sets out an action plan for attracting new generation, promoting conservation and enhancing the reliability of the transmission grid.  The Final Report's key recommendations include:

ELECTRICITY PRICING

Electricity pricing for default supply customers should be stable and should be set by the Ontario Energy Board ("OEB") at a level that reflects the true cost of power.  In setting the default supply price, the OEB is encouraged to consider a "blended price" approach that reflects the cost of power from the existing generating facilities of Ontario Power Generation Inc. ("OPG"), long-term contracts, short-term contracts and the spot market.

  • Customers with "smart meters" should be offered prices that reflect the difference in cost of power between off-peak and peak periods.
  • All consumers should continue to have the option of entering into supply contracts with energy retailers and wholesalers.
CONSERVATION
  • The Independent Market Operator ("IMO") Market Rules should allow those who can reduce electricity demand during high use periods to bid in that capacity and be compensated on the same basis as suppliers of power.
  • Retailers, energy service companies and local distribution companies ("LDCs") should be given a financial incentive to help consumers reduce consumption and shift their power usage away from periods of high demand.
  • LDCs and transmitters should be compensated whenever they invest in demand side management.  They should also be able to recoup any revenue loss resulting from conservation.
  • The Ontario government should continue to enhance conservation through tax incentives, the development of energy efficiency standards and the reduction of its own electricity use.
ADEQUACY OF SUPPLY

Ontario should strive for a diverse supply and demand mix, including renewables, distributed generation and conservation.

  • Ontario should move towards a market based on long-term contracts between multiple buyers and multiple sellers.
  • Efficient market signals for supply planning and demand response are important.  The IMO should continue to proceed with a day-ahead market, and a spectrum of futures markets should also be developed.
  • The IMO spot market should serve primarily as a balancing pool.
  • As a transitional measure, the Government should designate the IMO, or create another entity, to enter into contracts with power producers for new supply.  The portfolio of contracts entered into should reflect the short-term, medium-term and long-term power needs of the province, and be responsive to any government direction on the desired supply mix.  Contracting should be conducted pursuant to an open and accountable process.
  • Ultimately, the province should develop a market whereby six to eight load-serving entities ("LSEs") will bear responsibility for acquiring electricity for customers who do not contract with retail or wholesale suppliers.  As these LSEs develop, the IMO should transfer energy contracting responsibility to them.
  • The development of distributed generation should be encouraged through a number of means, including tax incentives and grid connection guidelines.
  • A Renewable Portfolio Standard should be implemented quickly to encourage the development of new renewable power sources.
GRID RELIABILITY

The transmission system should be planned and managed as basic public infrastructure, facilitating new supply and competition.  This represents a shift away from a merchant transmission model based on congestion pricing.

  • The OEB should set and enforce transmission and distribution reliability and service standards.
  • Hydro One should develop a comprehensive long-term transmission development plan (minimum 10 years, preferably 25 years).  The plan should be developed with the assistance of generators, customers, the IMO and other transmitters.
FUTURE ROLE OF OPG

Investment in new generation should come from the private sector.  OPG would be restricted to acting as an investor of last resort in any new greenfield supply.

  • OPG should partner with private investors to further develop its existing facilities.
  • The current Market Power Mitigation Agreement needs to be modified, given the Government's commitment to ongoing public ownership of existing OPG assets.  Nevertheless, concerns about the market power of OPG need to be addressed.  The Government should develop some other process to address these concerns.  For example, long-term regulated contracts reflecting the costs of power generated by OPG's hydro and nuclear assets might be one way to avoid potentially unfair competition with private supply.

The Final Report proposes a number of important changes to the Ontario market.  How and when these changes are implemented will be fundamental to the success of the Ontario electricity market.

The purpose of this document is to provide information as to developments in the law. It does not contain a full analysis of the law nor does it constitute an opinion of Ogilvy Renault or any member of the Firm on the points of law discussed.

For further information, please contact one of the lawyers mentioned below: 

Charles Keizer (416) 216-2342 ckeizer@ogilvyrenault.com
Alan Mark (416) 340-6165 amark@ogilvyrenault.com
Kelly Friedman (416) 340-6185 kfriedman@ogilvyrenault.com
Valerie Helbronner (416) 340-6181vhelbronner@ogilvyrenault.com
Richard J. King (416) 216-2311 rking@ogilvyrenault.com
Andrew A. Taylor (416) 216-4771 ataylor@ogilvyrenault.com 

©OGILVY RENAULT 2004 - All Rights Reserved

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Charles Keizer
Toronto
416.216.2342
ckeizer@ogilvyrenault.com
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Alan Mark
Toronto
416.216.4865
amark@ogilvyrenault.com
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Kelly Friedman
Toronto
416.216.2985
kfriedman@ogilvyrenault.com
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Valerie Helbronner
Toronto
416.216.3303
vhelbronner@ogilvyrenault.com
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Richard J. King
Toronto
416.216.2311
rking@ogilvyrenault.com
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Andrew A. Taylor
Toronto
416.216.4771
ataylor@ogilvyrenault.com
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