Authored By: Patrick Gajos
With a few weeks before the start of the 2022 general election campaign, Ontario finds itself in a drastically different political landscape than it did four years ago. In this post, our Energy Practice Group reviews the paradigm shift that has occurred over the course of the incumbent government’s first mandate and provides insights into what to expect next. Energy issues that feature in the coming months will impact the energy sector for decades.
In 2018, the Progressive Conservative Party, lead by Premier Doug Ford, was elected to form a majority government, marking the end of over 15 years of Liberal Party rule in Ontario. That campaign amplified a theme of mismanagement in the electricity sector, cost overruns, lucrative contracts, and oversupply. The government stated it was given a mandate to “clean up the hydro mess”. This translated into an immutable priority to reduce electricity costs for people and businesses in Ontario. The government’s first year in power was defined by cancelled contracts, decommissioned projects, regulatory reform, and tense relations.
While working to remove costs from the system, the government also introduced the Ontario Electricity Rebate to stabilize residential and small business electricity bills at the rate of inflation.
By late 2020, the government introduced the ‘Comprehensive Energy Plan’. Through the Plan, the government committed to fund the cost of above-wholesale rates of renewable power generation through tax revenues. This resulted in over $3 billion of savings for industrial and commercial customers.
Now, the government has all but claimed victory on the electricity file. The government’s actions were recently reviewed by the Financial Accountability Office of Ontario report which validated more than 12% in cost reductions by 2024 for regulated customers as compared to the plan under the previous government. As the adage goes: “promise made, promise kept”.
While the strong rhetoric about affordability has toned down considerably, there are other pressures building and new priorities forming. There is an institutional awakening that supply shortages are on the horizon.
The government is closely examining the scale of the problems that lie ahead, but a coordinated plan remains outstanding. The Independent Electricity System Operator (IESO) recently increased forecasts about imminent supply shortages, and this has gripped the attention of the entire sector. The IESO is developing procurement tools to address these supply needs, focused largely on capacity resources emerging in 2025 and energy resources in the early 2030s.
Simultaneously, the government has initiated or is considering countless other workstreams, including the following:
Beyond a stated focus on affordability, flexibility, reliability and sustainability, notably missing is direction from the government to holistically tie-in policy priorities with the procurement tools and market mechanisms being developed by its agencies. Decision points are inevitable, and as time goes by, options are likely to become more limited and increasingly costly. The big questions going into this election are:
These questions have been traditionally answered in the form of an integrated resource plan. Perhaps the absence of one is a sign that the Ministry of Energy will largely defer to its agencies to shape the grid of tomorrow. Looking at polling data, there are few reasons to believe that any of these questions will be addressed during the campaign. If history teaches us anything however, it’s that elections matter.
Regardless of who forms government after elected June 2nd, that government will have to navigate complex issues and divergent imperatives that will chart the course for Ontario’s electricity system.
Stay tuned for more updates from our Energy Practice Group throughout the 2022 Ontario General Election.
Please do not hesitate to contact your Sussex consultant should you have any questions.
Bonnie Hiltz, Vice President and Energy Practice Group Lead
Chris Benedetti, Managing Partner
Mark Olsheski, Vice President
Patrick Gajos, Director and General Counsel
Alex Simakov, Senior Associate