The Ontario Ministry of Energy released its much anticipated Electrification and Energy Transition Panel Report on January 19, 2024. While the Report advances important conversations concerning the need for integrated energy system planning and meaningful Indigenous participation, it missed a significant opportunity to provide much needed regulatory clarity.

In response to the Panel's request for prior stakeholder feedback, the Ontario Energy Board (OEB) submitted written advice to the Panel on June 30, 2023 seeking, among other things, an expansion of its legislative mandate to include ''a specific reference to reducing greenhouse gas (GHG) emissions or to net zero to provide clarity and predictability to the sector''1. As the OEB wrote:

"The energy transition will likely require new investments in electricity system infrastructure, including new transmission infrastructure. There may be an opportunity to add new language to the OEB's authority related to electricity transmission leave to construct applications [under section 92 of the OEB Act] as a means of clarifying that the OEB can consider government policy related to GHG emissions or net zero in assessing whether a transmission project is in the public interest."2

In determining whether a leave to construct application is in the public interest, the OEB is currently limited to considering the interests of consumers only with respect to prices and the reliability and quality of electricity service.3

The OEB's advice to the Panel was developed further to the Minister's October 21, 2022 mandate letter emphasizing that it was "counting on the OEB, informed by the work of its Innovation Task Force, to provide the Panel with its best advice on potential changes to the OEB's mandate and operations, including any necessary legislative amendments" (bolding original).4

The OEB's advice to the Panel was informed by feedback from stakeholders, cross-jurisdictional research, and input from consultants.5 Notwithstanding, the Panel appears to have adopted the approach proposed in Electricity Canada's Back to Bonbright: Economic Regulation Fundamentals can Enable Net Zero report released in April 2023. There, Electricity Canada concluded in part that the inclusion of new and broad statutory objectives such as to "reduce GHG emissions" or "protect our natural environment'' would provide too much uncertainty and lead to "never-ending debate[s]" in regulatory proceedings.6

Like Electricity Canada, the Panel appears to instead recommend a deferred approach to legislative amendment until specific, measurable objectives have been set by the provincial government, i.e. the reduction of GHG emissions from utility customers by X% by 2030, Y% by 2035, etc. As the Panel writes:

"The Panel feels strongly that the OEB's existing objectives and associated mandate are sufficient for the moment. As electrification and the energy transition progress, it may become necessary to provide the OEB with additional objectives, authority or functions in order to ensure it is able to effectively regulate the evolving energy sector and support the province's clean energy economy goal. Across Canada and internationally, the integration of climate objectives into economic regulation is in its very early stages. A review in the future will also enable learnings from other jurisdictions to be incorporated into potential changes to the OEB. The single clearest imperative is the need for adaptability and flexibility as the energy sector undergoes this significant transformation.''7 (bolding added)

But an imprecise statutory mandate is precisely what independent regulatory agencies require in order to exercise "adaptability" and "flexibility". Indeed, most if not all of the OEB's existing legislative mandates are written in broad terms such as to "inform", "promote" or "facilitate" various goals for the electricity and gas sectors. A GHG emissions reduction mandate would simply be one factor the OEB could consider and balance with other necessary factors in fulfilling its statutory responsibilities.

Even Electricity Canada's report recognized that "Mandate Letters, Letters of Direction ... or Special Directions from the government to the regulator" can be effective tools in achieving desired outcomes.8 In its more recent November 29, 2023 mandate letter to the OEB, the Minister reiterated its request for the OEB to identify any legislative or regulatory barriers that may be preventing the OEB from executing on certain government priorities including urgently advancing the net-zero emissions electricity generation mandate in the government's Powering Ontario's Growth report released in July 2023.9

In the author's view, the Panel had sufficient authority to recommend to the government to amend the OEB Act to include a GHG emissions reduction mandate when considering not only leave to construct applications, but also in the OEB's evaluation of other utility investments such as distributed energy resource (DER) development and implementation when setting just and reasonable rates for regulated utilities.

The likelihood of any imprecise legislative mandate resulting in "endless debate" in regulatory proceedings is no less than that which may arise in proving (or disproving) whether an application satisfies a precise net-zero goal, i.e. X% in GHG emissions reduction by 2040. Moreover, a very specific net-zero statutory objective could quickly become obsolete as energy generation technology continues to advance over the coming decades and environmental conditions evolve.

Given Canada's international net-zero commitments, including achieving a net-zero electricity sector by 2035, the expansion of the OEB's current statutory mandate to include considerations of government policy pertaining to GHG emissions reduction is immediately required. The failure by the Panel to include this recommendation runs contrary to current government goals for creating an environment of regulatory decision-making that promotes economic investment in clean energy development in the province.

Footnotes

1. Report of the Ontario Energy Board to Ontario's Electrification and Energy Transition Panel dated June 30, 2023 at page 2.

2. Ibid.

3. Ontario Energy Board Act, 1998 Act at subsection 96(2).

4. Mandate letter from Ministry of Energy dated October 21, 2022 to Ontario Energy Board at page 2.

5. Report of the Ontario Energy Board to Ontario's Electrification and Energy Transition Panel dated June 30, 2023 at page 2.

6. Back to Bonbright: Economic Regulation Fundamentals can Enable Net Zero, Electricity Canada, April 27, 2023 at page 35.

7. Ontario's clean energy opportunity: Report of the electrification and energy transition panel.

8. Back to Bonbright: Economic Regulation Fundamentals can Enable Net Zero, Electricity Canada, April 27, 2023 at page 35.

9. Mandate letter from Ministry of Energy dated November 29, 2023 to Ontario Energy Board at pages 2 and 7.

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