Ontario’s Power Trip: Who’s got the plan?

One of a series: Ontario claims to have a long-term energy plan. So far, there’s no sign of it

Parker Gallant

In a surprise announcement earlier this month, the Ontario government pulled the plug on a new 900-megawatt gas generation plant in the Toronto suburb of Oakville. Since the contract to build the $1.3-billion plant had already been signed with TransCanada Corp., the provincial government is on the hook for undisclosed but likely substantial penalties. But there’s an even bigger surprise in the gas plant backdown. In announcing the reversal, Energy Minister Brad Duguid said the province was killing the plant because it no longer needed the power. “As we’re putting together an update to our Long-Term Energy Plan,” he said, “it has become clear we no longer need this plant in Oakville.”

The real surprise here is the reference to a “Long-Term Energy Plan.” No long-term plan exists, at least in any public sense. What does exist is a seven-year planning saga that has left a Keystone Kops trail of procedural mash-ups and a power policy shambles.

Few believe that the gas plant decision was anything more than a move to save the Liberals a couple of seats in the Oakville area, where a local protest movement brought in celebrity U.S. environmental icon Erin Brockovich to oppose the $1.3-billion project.

Mr. Duguid, pretending otherwise, makes it sound as if some orderly and rational process had determined precisely how much electricity Ontario will need in the future. But the history of long-term electricity planning under Dalton McGuinty’s Liberal government and various energy ministers, including George Smitherman, now a candidate for mayor of Toronto, suggests anything but order and rationality.

The 900-megawatt plant Ontario now says it no longer requires was ordered only 12 months earlier based on a “directive” issued by Mr. Smitherman. In August 2008, Mr. Smitherman used his ministerial power to instruct the Ontario Power Authority to “move expeditiously” on the new Oakville power plant. “It would be prudent to finish this procurement process by the end of June 2009.” The OPA, which executes government policy in electricity, moved quickly and signed a deal with TransCanada in September 2009.

The Oakville reversal is the tail end of seven years of a bungled decision-making process grounded in runaway green activitism and rampant ad hoc-ery.The Liberals took over the electricity industry in 2003 with a high-profile claim that the province lacked a long-term plan. So it appointed the Ontario Power Authority in 2004 and assigned it the task: Create and submit a 20-year Integrated Power System Plan (IPSP) every three years.

To prepare for the 20-year IPSP, the government would establish a long-term outlook of how much electricity the province would need. Working with the OPA, the government would also determine what kinds of energy sources would be used to fulfill the expected demand. This was known as the “Supply-Mix Directive.”

Part of the objective was to fulfill a McGuinty election promise to shut down 6,500 megawatts of coal capacity, increase the use of renewables and create programs producing 6,300 megawatts of conservation. The mix directive also told the OPA how much of a share of the total market should be allocated to nuclear, gas, hydro, etc.

Armed with the long-term Supply-Mix Directive from the government, the OPA then produced a formal public document known as the IPSP — the Integrated Power Supply Plan.

In 2007, former OPA chairman Jan Carr met the three-year mandate and produced the first IPSP, a sprawling document that set out a 20-year strategy. Under the government-established process, that first IPSP was sent to the Ontario Energy Board for regulatory review in 2007. So far, so good.

But then the OEB started the IPSP review process amid requests from dozens of different parties who wished to intervene in the approval process.Tens of thousands of pages were filed by the OPA and interveners. The document list associated with the IPSP rose to include hundreds of filings on the OEB’s website. The public hearings went on for a year or more.
Then came another directive from Mr. Smitherman. In September 2008 — a month after he had ordered the Oakville plant — Mr. Smitherman ordered the OPA to prepare a new 20-year plan. Circumstances and policy had changed, he said, and it was time to “revisit” the 2007 IPSP that was then under review by the provincial regulator.

Today, almost four years after the first IPSP was produced in 2007, no plan exists. The first plan was never approved by the regulator. That first IPSP, moreover, has now somewhat mysteriously disappeared from its public perch on the regulator’s website. After three years of preparatory effort and four years dragging through regulatory review — thereby wasting 30% of the planning period — Ontario’s first IPSP appears to have vanished from the public record. During most of those years, the government ignored the contents of the IPSP and on an ad hoc basis dictated electricity development, making a mockery of the alleged regulatory system.
As a result, we have the minister of energy claiming to have a new long-term energy plan that nobody has seen to replace the old long-term energy plan that has never been approved and is also now not to be seen by anybody.

So who’s got the new 20-year plan for Ontario’s electricity needs? Where is it? What does it say? Does it exist?

Even more confusing was Mr. Duguid’s claim to have reached supply-and-demand conclusions regarding the Oakville plant based on an update to the Long-Term Energy Plan that he said last month would not be ready for several months. The IPSP, he said, would not be completed until 2011 — after the province had collected the results from an online survey of Ontario residents, conducted on the ministerial website. The survey, loaded with leading questions that favour government policy, is still underway. Given the way it’s being conducted, the final survey is guaranteed to endorse the government’s plans, which in turn are based on ministerial directives which in turn are based on … what?

This is planning run backwards: Issue the directives, then work up a long-term plan that fits around the directives.

And these directives have been substantial. While the official 20-year plan stumbled through the regulatory process on its way to nowhere, energy ministers have micromanaged the Ontario electricity system, from the signing of billion-dollar contracts down to the location of transmission lines.In September 2008, shortly after ordering up the Oakville gas plant, Mr. Smitherman told the OPA to scrap the 2007 IPSP and start working on a new one. Mr. Smitherman seemed to have a long-term plan in his head. He issued instructions to the OPA based on a long list of green energy objectives — more renewables, transmission lines to northern Ontario, biomass to replace coal, the deployment of smart meters and consultations with First Nations as partners in generation and transmission.

He also ordered a new 20-year plan: “In furtherance of this Directive, the OPA shall provide an amended and revised IPSP. It is expected that the revised IPSP would be provided to the OEB by the OPA no later than six months from the date hereof.” That’s the same IPSP that will now not be ready at least until early next year.

Without a new plan in place, Mr. Smitherman nonetheless produced scores of other directives, including one in December 2008 telling the OPA to procure advertising. Then, still without a long- term plan, Mr. Smitherman brought in Ontario’s big policy transformation, the Green Energy Act, giving even greater power to the energy minister and the Cabinet. In September 2009 — within days of the Oakville plant contract signing — he fired off another blockbuster directive to the OPA: ”I direct you to develop a feed-in tariff (FIT) program that is designed to procure energy from a wide range of renewable energy sources.”

The FIT, a key element of the Green Energy Act, is the basis for scores of deals that, among other things, pay retail giants like IKEA 71.3¢ for a kilowatt-hour of solar power. The 71.3¢ IKEA deal was announced the same day the Oakville plant, whose power costs would be maybe 10¢ a kilowatt hour, was killed.

If any one politician is responsible for Ontario’s electricity costs doubling over the next five years, Mr. Smitherman is the top candidate.The current Minister, Brad Duguid, took up the Smitherman role within days of taking over the portfolio. In April 2010, he issued the Samsung windmill and solar directive to the OPA.

The government, he said, has “entered into a green energy investment agreement with Samsung C&T Corporation and Korea Electric Power Corporation.” The Samsung consortium, the Minister said, has agreed to develop 2,500 megawatts of wind and solar renewable generation projects. The OPA, he said, is directed to negotiate “one or more power-purchase agreements as appropriate … with the Korean Consortium.”

The cost of the Samsung deal, estimated at $7-billion to $10-billion depending on the method of assessment, will be passed on to electricity consumers, as will the massive costs of accommodating wind and solar power.

Last month, Mr. Duguid was still at it. He told the OPA to provide transmission for the Samsung wind and solar projects funded by feed-in tariffs and also to set aside another 500 megawatts of transmission capacity elsewhere. The cost of this is unreported, unregulated and unreviewed.
All these directives but still no long-term plan, the very element of policy the Liberals ridiculed when they took office in 2003.

There is no plan — that is, except for the one that will be produced next year long after all the contracts have been signed.

The OPA was originally established to be a temporary agency that would develop a 20-year plan and then disappear. Instead of that it has grown hugely and accomplished little beyond signing lots of 20-year contracts for wind and solar power, follwing scores of directives issued by the government. This is costing the province’s ratepayers and taxpayers billions while making the province an unattractive destiny for business.

This is long term planning Liberal-style: Directives first, plan later.

Parker Gallant is a retired Canadian banker who looked at his Ontario electricity bills and didn’t like what he was seeing.Read more: http://opinion.financialpost.com/2010/10/21/ontarios-power-trip-whos-got-the-plan/#ixzz132zXIxds