What’s Next for the Ontario Energy Board?

The final months of 2017 have seen a flurry of activity around the future direction and focus of the Ontario Energy Board (OEB).

The Ontario Government has issued its 2017 Long-Term Energy Plan (2017 LTEP)1 setting out plans and priorities for the coming years. The Ontario Government has also created an expert “Modernization Panel” to review the OEB and report back by the end of 2018. The OEB itself has issued a “Strategic Blueprint” setting out areas of focus for 2017 to 2022. A main focus in each of these initiatives is the need for the OEB to understand, accommodate and facilitate evolution of the regulated utility sector in the face of technological changes. An important backdrop to all of this is the upcoming Ontario election in June 2018. Depending on the outcome of the voting, there may be a shift in OEB focus and priorities. In the sections that follow, each of these items is briefly discussed.

2017 LTEP

On October 26, 2017, Ontario’s Minister of Energy Glenn Thibeault released the 2017 LTEP. This long-awaited document is intended to set the course for Ontario’s energy supply over the coming years.

The 2017 LTEP is organized into eight chapters, each of which focuses on a different topic. Examples are “Ensuring Affordable and Accessible Energy,” “Ensuring a Flexible Energy System,” “Innovating to Meet the Future” and “Responding to the Challenge of Climate Change.” Each chapter sets out the Government’s plans to address the challenges of that topic over the near and long-term future.

While many of the initiatives highlighted in the 2017 LTEP have previously been announced there are a number of new initiatives announced in the 2017 LTEP that will impact and expand the role of the OEB. Examples include the following:

  • Expanding opportunities for electricity distributors (LDCs) to offer “non-wires” solutions to customers, such as customer-connected energy storage, electric vehicle infrastructure and encouraging joint service partnerships.
  • Enhancing the net metering framework to allow different arrangements, such as third-party ownership of net-metered renewable generation facilities on a customer’s premises and “virtual net metering,” where a party could treat renewable generation in another location as offsets to the party’s own consumption.
  • Reducing market and regulatory barriers to deployment of energy storage to encourage the cost-effective deployment of energy storage, where it can provide value to customers and the electricity system.

In late October, Minister Thibeault directed the OEB to prepare an “implementation plan” setting out steps to implement the goals and objectives set out in the 2017 LTEP.2 Key items that the OEB must address in its implementation plan include the following:

  • Examining and identifying steps for pursuing opportunities to advance the cost-effective modernization of Ontario’s electricity sector, including non-wires solutions, customer participation and energy efficiency.
  • Identifying barriers to the development of distributed energy resources such as energy storage at scales and locations that provide value to transmission, distribution and customers.
  • Identifying tools and steps that would mitigate costs for ratepayers (such as reduced regulatory review) and enhance consumer protection in relation to unit sub-meter providers and in the natural gas sector.
  • Continuing to implement the Regulated Price Plan Roadmap, including consideration of new pricing structures that give stronger price signals.

The implementation plan must be completed by January 31, 2018.

OEB’s Strategic Blueprint

In December 2017, the OEB released its “Strategic Blueprint” for 2017 to 2022 titled “Keeping Pace with an Evolving Energy Sector”.3 The Strategic Blueprint sets out the OEB’s updated statement of “[its] Vision, Mission and Values and of the Goals and Objectives that will guide [its] work over the next five years.” The Strategic Blueprint was promised in the OEB’s most recent Business Plan4 and is said to reflect “the OEB’s recognition of the significant changes underway in the energy sector, not only in Ontario but around the globe.”

At the outset of the Strategic Blueprint, the OEB identifies four “Strategic Challenges” to be met in a period of accelerating change and transformation: Sector Transformation & Consumer Value; Innovation & Consumer Choice; Consumer Confidence; and Regulation “Fit for Purpose.” To meet these challenges, the OEB plans to maintain its current approach to consumer-centric regulation, but with a stronger emphasis on the new and different challenges posed by sector transformation.

The Strategic Blueprint document looks at trends and developments in the energy sector and comes to a number of interesting conclusions about how the OEB should proceed. Among these are the following:

  • The OEB’s approach must be grounded in an appreciation of the circumstances in Ontario and of its own mandate. It should focus on how the OEB can best address sector evolution through the use of existing regulatory powers and tools, including rate making, infrastructure approvals, licensing, codes and rules, and the issuance of policy guidance.
  • It is premature to sanction or mandate, as some regulators have, a particular new business model for utilities or a specific new “platform” to accelerate the deployment of distributed resources – picking a particular model or platform at this point would impede innovation. However, a “wait-and-see” approach is not sufficient for Ontario. Instead, the OEB has the opportunity – and the responsibility – to support and guide the sector it regulates through the evolution underway.

Taking the foregoing into account, the OEB has created a set of “Strategic Goals and Objectives” to address the Strategic Challenges that it has identified. The Strategic Goals represent the specific outcomes the OEB aims to achieve with respect to each of the four Strategic Challenges and the Strategic Objectives describe the particular areas on which the OEB will focus in order to attain each of the Strategic Goals.

In relation to the “Innovation & Consumer Choice” Challenge, the OEB states that this will be met when “utilities and other market participants are embracing innovation in their operations and the products they offer consumers”. The OEB aims to achieve this Strategic Goal by (among other things): remunerating utilities in ways that encourage them to pursue cost-effective innovation in their operations and services; modernizing the OEB’s rules to reflect the needs of an evolving sector; addressing any unwarranted regulatory barriers to innovation and new business models that benefit consumers; and working with market participants to identify and understand emerging new energy-related “value streams” and service models.

OEB Modernization Panel

On December 15, 2017, the Ontario Government announced that it appointed Richard Dicerni to head an expert panel to conduct a review of the OEB.5 According to the announcement, “[t]he panel will have a broad mandate including reviewing how the OEB can continue to protect consumers amidst a rapidly changing sector, support innovation and new technologies, and how the OEB should be structured and resourced to deliver on its changing role.” The panel will seek feedback from the public starting in spring 2018, examine best practices from other jurisdictions and report back to the Government by the end of 2018.

The creation of the OEB Modernization Panel appears to be a recognition that the electricity industry is changing rapidly and new approaches may be needed to manage this evolution. At this time, it is not clear whether the OEB review will be as wide-ranging as the recent expert panel on the modernization of the National Energy Board (NEB).6

2018 Ontario Provincial Election

Ontario’s next provincial election will take place on June 7, 2018. The outcome of that election can be expected to shape future energy policy in the province.

Should the current Liberal Government be re-elected, then we may assume that current energy policy will continue in similar fashion. However, if another party wins the election (or perhaps holds the balance of power in a minority government), then there may be changes.

For example, the Progressive Conservative party platform includes plans to cancel the Climate Change Action Plan7, the Cap and Trade Program and the Green Energy Act8, and promises reductions to electricity bills.9 Accomplishing these items would presumably include issuing new directions and priorities to the OEB. Interestingly, though, the Progressive Conservative platform recognizes that it will be “vital” to have an energy regulator “that can adapt to ever-changing technologies”.

The NDP party has indicated its plan to return Hydro One Networks to public ownership, reduce electricity bills, cap “private profit margins” and bring “real oversight to electricity prices”.10 These items would require new direction to the OEB.

Conclusion

As can be seen, there are a number of initiatives underway that will shape and guide the OEB’s focus and activities in the coming years. The recurrent theme is technological and other changes that are impacting the energy sector, and how the regulator will react and evolve traditional regulatory structures and approaches. The OEB’s own plans will become clearer as it issues the 2017 LTEP implementation plan and considers requests from regulated utilities to expand and evolve their businesses and activities. It will be interesting to see how much the OEB will be able to set its own course, and how much the OEB’s course will be impacted and directed by outside influences such as the Modernization Panel and any new Provincial Government.

*David Stevens is a partner at Aird & Berlis LLP, and is an editor and contributor for EnergyInsider.ca.

  1. Ministry of Energy, Ontario’s Long-Term Energy Plan 2017: Delivering Fairness and Choice, (Toronto: Ministry of Energy, 2017), online: <https://files.ontario.ca/books/ltep2017_0.pdf>. The Ministry of Energy is the author of the 2017 LTEP, as contemplated by the Energy Statute Law Amendment Act, 2015. This stands in contrast to prior LTEPs which were more traditional “planning documents” prepared by the Independent Electricity System Operator (IESO). While the OEB will be called upon to implement aspects of the 2017 LTEP, there is no requirement for the 2017 LTEP to be reviewed or approved by the energy regulator.
  2. OC 2122/2017, online: <https://www.oeb.ca/sites/default/files/Directive_to_OEB_LTEP_Implementation_Plan_20171026.pdf>. The IESO is required to prepare a similar implementation plan.
  3. Ontario Energy Board, Strategic Blueprint: Keeping Pace With an Evolving Energy, (Toronto: OEB, 2017), online: <https://www.oeb.ca/sites/default/files/OEB-Strategic-Blueprint-2017-2022-E.pdf>.
  4. Ontario Energy Board, Ontario Energy Board 2017 to 2020 Business Plan, (Toronto: OEB, 2016), online:   <https://www.oeb.ca/oeb/_Documents/Corporate/OEB_Business_Plan_2017-2020.pdf>.
  5. Ministry of Energy, Ontario Establishing Panel to Modernize the Ontario Energy Board: Province Seeking Advice to Prepare for Innovation and Technological Change, (Toronto: Ministry of Energy, 2017), online: <https://news.ontario.ca/mei/en/2017/12/ontario-establishing-panel-to-modernize-the-ontario-energy-board.html>.
  6. Discussed in Nigel Bankes, “The Report of the Expert Panel on the Modernization of the National Energy Board and the Response of the Government of Canada” (2017) 5:3 Energy Regulation Quarterly, online: <http://www.energyregulationquarterly.ca/articles/the-report-of-the-expert-panel-on-the-modernization-of-the-national-energy-board-and-the-response-of-the-government-of-canada#sthash.IQPj8QOs.dpbs>.
  7. Government of Ontario, Ontario’s Five Year Climate Change Action Plan 2016 – 2020, (Toronto: Government of Ontario, 2016), online: <http://www.applications.ene.gov.on.ca/ccap/products/CCAP_ENGLISH.pdf>.
  8. Green Energy Act, 2009, SO 2009, c 12, Schedule A.
  9. Progressive Conservative Party of Ontario, “People’s Guarantee”, online: <https://www.ontariopc.ca/peoples_guarantee>.
  10. Ontario NDP, “Hydro costs are sky high: Let’s do something about it”, online: <https://www.ontariondp.ca/hydro>.

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