The Bill 135 Governance Model: All Roads Lead to the Government
On October 28, 2015, the Government of Ontario tabled Bill 135, that will, if enacted, effectively remove independent electricity planning and procurement authority from the IESO and transmission approval from the OEB. Both of these types of authority will be transferred to the Minister of Energy. The Minister will produce long-term energy plans that will be binding on the Ontario Energy Board and the IESO, both of whom must issue implementation plans designed to achieve the objectives of the Government’s plan. The Government’s new planning authority is broader than the IESO’s. It includes both bulk system planning (as was in the IESO’s mandate), and also extends to distribution systems. The Government’s existing procurement authority will also be extended as Bill 135 gives the Government additional powers to direct the procurement of energy storage and transmission.
The net result of Bill 135 is therefore to ensure that the main energy institutions – the IESO and the OEB – are focused almost exclusively on implementing Government plans and directives. The Government has always been steering the direction of energy policy. It is now rowing as well: it is in direct control of every policy instrument available. From a governance perspective, it could lead one to wonder whether there are any checks and balances left in the system at all.
Bill 135 raises a number of questions for both the agencies and the Government. Some of them are:
- What is the residual independent authority of the agencies? The OEB and the IESO (and the OPA before it) were established to use their independent processes and statutory objectives to implement the broad objectives of energy policy as reflected in legislation. If they are now to solely implement Government plans and directives, then what is the value of their independent fact finding and judgment in the implementation of their statutory objectives? For example, the IESO has been urging a greater reliance on markets both for energy and capacity. It is not clear how this is possible if the Government is determining the outcomes. As well, the OEB has commenced a regional planning exercise which was supposed to address trade-offs between resource types (transmission, generation and conservation). It now appears that the Government will make all of those trade-offs.
- What is the criteria and process by which the Government will develop plans and directives? The criteria that the OEB was supposed to apply to the review of integrated power system plans was by reference to prudence and cost effectiveness as determined in an open hearing. While people may be critical of the planning criteria historically applied by the OPA and the OEB, planning requires trade-offs between a number of factors – such as efficiency, reliability, environmental impact, economic development, etc. The Government clearly makes these types of trade-offs in other infrastructure areas – roads, hospitals, etc. Will these criteria now apply to energy; will the Government develop new criteria; or will there be no meaningful criteria at all?
- What is the purpose of the new directive powers? Transmission planning and development has proven to be challenging. In both Alberta and Ontario there have been concerns raised about the effectiveness of the process for attracting new entry. There could be lessons learned from both jurisdictions. It is not clear how those lessons can be incorporated if the only process that the legislation puts in place is that the Government will decide if, when, and how new transmission should be developed. As for storage, it provides a function that a number of existing services and assets can now provide, most at a lower cost. It is not clear why the Government should be choosing that particular technology over other, competing approaches.
As a result, although Bill 135 is clear that authority for every electricity decision will reside with the Government, it does not address how the Government will exercise that authority. Given the magnitude of the issues involved, one can only hope that the Government will develop new governance models to guide the exercise of its apparently unrestricted powers.
IESO Independent Electricity System Operator OEB Ontario Energy Board