On October 23, 2024, the…

On October 23, 2024, the Ministry of Energy and Electrification (Ministry) posted proposal ERO 2019-9284 soliciting feedback on legislative amendments that would enable integrated energy resource planning and kick-start early actions to ensure Ontario’s energy system remains affordable, reliable, and clean while supporting intensifying electrification and economic growth. These proposed changes align with and support progress on Ontario’s policy vision, “Ontario’s Affordable Energy Future: The Pressing Case for More Power.”

Hydro Ottawa is pleased to offer the following comments on the Ministry’s proposed amendments to the Electricity Act, Ontario Energy Board Act, and the Energy Consumer Protection Act to enable an affordable energy future.

Amendments to the Electricity Act - Integrated Energy Resource Planning and Programs to Increase Energy Affordability
The Ministry is proposing amendments to the Electricity Act that create an "Integrated Energy Resource Plan" considering all energy sources. Hydro Ottawa is supportive of these proposed amendments and believes that considering all forms of energy, alongside efficiency, storage, and demand management, is essential for a sustainable and resilient energy future. The shift towards an “Integrated Energy Resource Plan” reflects a holistic approach that Hydro Ottawa believes is necessary to address the complex challenges and opportunities to enable the energy transition.

Hydro Ottawa is furthermore supportive of the Ministry’s proposed amendments that would enable the Independent Electricity System Operator (IESO) to administer enhanced energy efficiency (EE) programs supporting beneficial electrification (BE). Empowering the IESO to administer BE programs and funding these programs through electricity rates represents a proactive approach to achieving a cleaner, more efficient, and cost-effective energy system for Ontarians.

Amendments related to Electric Vehicle Charging
To encourage the growth of EVs in Ontario, the Ministry is proposing amendments to exempt EV charging companies from regulations under the Ontario Energy Board Act, the Electricity Act, and the Energy Consumer Protection Act. Hydro Ottawa supports the Ministry’s proposed amendments exempting EV charging companies from certain regulations and believes this will foster a competitive market with more choices for consumers. This aligns with the OEB’s 2016 assessment that such regulations are unnecessary for this inherently competitive sector.

Notwithstanding, Hydro Ottawa cautions the government to remain vigilant about consumer protection in this evolving market. Drawing parallels to some of the challenges encountered with third-party unit sub-metering companies, it will be important to consider potential issues in consumer choice, billing transparency, and metering accuracy in the EV charging sector. Therefore Hydro Ottawa suggests requirements regarding uniformity in presentment of electricity charging rates. While charging options may be more varied in nature than vehicle fueling, customers understanding charges prior to agreeing/incurring the costs is an important element for any transparent purchasing transaction.

Electricity Connections to Support Growth
The Ministry is proposing changes to the Ontario Energy Board Act aimed at expediting and reducing the cost of expanding the electricity grid in high-growth areas. This involves granting the government the authority to adjust how costs for new transmission and distribution infrastructure are shared, with the goal of reducing the burden on early adopters and promoting timely grid expansion to support new housing, industry, and electrification.

Hydro Ottawa has significant concerns regarding the proposed amendments, particularly those related to cost recovery. The proposed changes would grant the government broad powers to alter the Transmission System Code (TSC) and Distribution System Code (DSC), including the ability to exempt parties from established cost-recovery and cost-allocation rules. Hydro Ottawa cautions that this broad authority could lead to unintended consequences with significant implications for the electricity sector, ratepayers and the competitive construction market.

Of particular concern is the potential impact on the financial stability of utilities. The ability to regulate cost recovery could inadvertently affect utility rates of return and restrict the ability to recover costs for critical infrastructure investments. This could jeopardize the reliability of the electricity grid and hinder the transition to cleaner energy sources.

The proposed amendments furthermore have the potential for inequitable cost allocation among customers through transmission rates. This may lead to a situation where customers across the province are funding specific projects, regardless of whether they directly or indirectly benefit from those projects, and ultimately create an unfair burden for some ratepayers and distort the principle of cost causality and utility comparisons.

Hydro Ottawa is also concerned with challenges regarding the consistent application of the Connection Cost Responsibility Agreement (CCRA) across different distributors. These inconsistencies could hinder benchmarking efforts and make it difficult to assess the efficiency and cost-effectiveness of distributors across the province. Additionally, granting the government increased regulatory authority may be perceived as political interference by credit rating agencies, potentially leading to credit downgrades for utilities and higher borrowing costs that are ultimately passed on to consumers.
Hydro Ottawa suggests that cost allocation challenges faced by high-growth areas may be rooted in project design limitations (for example land only development or uncertain multiple phases/developers) or approval difficulties, requiring a deeper analysis of the issue beyond adjusting the cost allocation framework. However, if the Ministry deems the cost allocation is not supportive of these projects, the issue likely exists in all projects and should be changed uniformly to ensure all future developments similarly benefit. In addition, if the proposed amendments are approved, and depending on the suggested changes to the TSC, all similar costs across all distributors should then be considered part of transmission costs, which should be borne by all ratepayers through transmission rates.

To address these concerns, Hydro Ottawa strongly recommends that the government incorporate specific parameters into the proposed legislation. Firstly, the legislation should explicitly define “cost allocation” to exclude utilities, ensuring that it applies solely to the allocation of costs between connecting customers and ratepayers. Secondly, Hydro Ottawa strongly encourages the government to include a new provision to the legislation that clearly states that the regulations cannot limit cost recovery by distributors or transmitters. It may furthermore be beneficial to consider implementing a time limit on the proposed changes to cost recovery. This approach would provide a temporary window for priority projects to proceed under the new framework, addressing immediate needs while allowing for a return to the established cost recovery regime at a later date. Lastly, if designated projects are approved, it is suggested that the Ministry establish regulatory mechanisms that recover the cost from the future expected growth areas to ensure non-benefiting rate payers are not subsidizing the cost.
Hydro Ottawa emphasizes that ensuring full cost recovery for utilities is crucial for ongoing investments in a safe and reliable electricity system.

Conclusion
Hydro Ottawa is supportive of the overall intention of preparing the province for growth while considering customer affordability. However, in managing identifiable growth projects, the Ministry should ensure stability in a competitive development/construction market, and consider impacts on affordability of non-benefiting customers, thus removing risks of unintended financial impacts of distributors.