Special Feature: Excerpt from the APPrO 2012, the 24th Canadian Power Conference IPPSO FACTO

Political issues in the power sector An in-depth discussion on how politics operates

Sean Conway Rob Silver Will Stewart

Reiterating parts of what was said by the most unclear of any period.” dation and private/public ownership, Energy Minister Chris Bentley the Silver then posed a set of coun- where are we heading? night before, Moderator Sean Con- ter-questions which highlight major • Consolidating central agencies? way from Queens University, opened issues: Would this make sense in 2014, 2018? the session with a question to Rob • Are we pro- or anti-nuclear and Ever? Silver: what’s the future? • Natural Gas: Were Oakville and Where are we in the here-and-now, • Green Energy Act: Huge mistake or Mississauga unfortunate slip-ups or is in terms of the politics of the Ontario inspired visionary policy? there something amiss with the gas fa- Energy file? • Should the risk for new generation cilities that could pose future concerns be borne by the private sector or by for province? Rob Silver, Crestview Strategy: “Let public crown corporations? It’s unclear what any of the major me say something somewhat provoca- • Transmission: Should it be public political figures will say about any of tive. Every year at APPrO we talk about or private? that in the coming months, Silver said. uncertainty and unpredictability in the • Private sector competition for east- The political uncertainty in the prov- Ontario energy sector, and since I have west connection: Good thing or not? ince is casting a large shadow over the been paying attention to the Ontario • Should the province sell any major future of energy policy and, there- energy sector, the period we’re in right Hydro One assets? fore, it is difficult to forecast where now, is bar-none the most uncertain, • Distribution: In terms of consoli- we might be by the time APPrO 2013

Excerpt from APPrO 2012, Canadian Power Conference Proceedings: Navigating Turbulent Waters — Page  comes around. options on the table. The parties are housing around the proposed site, but Will Stewart, Navigator Limited starting to crystallize their positions there hasn’t been a new house built agreed about the uncertainty, adding on centralization, privatization, or around there in 35 years. It was little that after two years into the McGuinty reorganization, approaches which are more than a “seat-saver program” for government we don’t know where generally associated with the NDP, the Kevin Flynn, Stewart believes. McGuinty’s policies actually stand. Conservatives and the Liberals, respec- With the proliferation of social “This is a time for strong, bold state- tively. media and campaigns-in-a-box, you ments for setting policy direction and To convince government to leave can find campaigns ready-made to stop then letting it go,” he said. the sector alone to do its job, Macaluso new generation plants. The energy Until we shut down the “directive suggested, we have to give them a rea- sector needs to do a better job at run- machine” in the Minister’s office that son to stay out. That reason is price. ning its own grassroots campaigns. continually fires off pieces of paper to All the plans—whether centralization, mentioned that his the OPA and OEB, we will never get privatization or reorganization— are old electoral district had 7 or 8 big hy- politics out of the Energy Sector, he focused on getting price to where it is dro dams, none of which could be built suggested. Politics will stay in energy affordable, competitive and reliable. today because the public opposition until the people in the energy sector Once we can accomplish that, we can would be too high. Accepting that we can manage the politics of the sector have more freedom and independence don’t live in an ideal world, he asked: themselves, without the politicians from whoever forms government, and “How do we do a better job of trying to feeling the need to get involved. we’ve got probably 20 weeks before we site this infrastructure in communities Mr. Conway asked Dave Butters find out who that is. when the ability today to stop things where we stand, as of November of The distribution sector has pro- seems to be greater than the ability to 2012, and what kind of advice he posed a number of plans that would complete things?” would give someone thinking about collectively save half a billion dollars a Will Stewart: The short answer entering the Ontario energy space. year on the electricity bill, which would is “I don’t know.” The government APPrO’s Dave Butters responded leave a lot of room for some of the tried to expedite the development of saying, “I think we are in a transitional things we do need to do, he said. wind turbines by limiting community period though I’m not quite sure what Some of the things that have been involvement, and that hasn’t worked we’re transitioning to. It’s not clear accomplished: either. The electoral map of Ontario what will happen after the Liberal • A cultural shift in favour of energy shows all the blue outside the cities party selects a new premier and a new conservation and all the red inside. For one thing, cabinet.” We have a reasonably clear • Short term supply has been bolstered just don’t site power plants beside idea of the conservatives’ energy policy (though long-term is still uncertain) homes and schools. from Tim Hudak. • The air is cleaner. Rob Silver: You can blame the He noted however that, behind all The area in which Mr. Macaluso proponents for what happened in the political rhetoric, we have actually would like to see more government Oakville; they should have done a bet- accomplished a lot: the lights are on, leadership is in infrastructure renewal. ter job consulting the community and we can afford to send Hydro One crews Our sector is aging across all parts, getting people onside. You can blame down to help our American cousins. particularly in the distribution sector, the design of the OPA’s process – there We have new gas plants, and new he stressed. We need to cultivate an should have been more points awarded wind farms. We have done what the environment that’s more conducive to for local support. Third are the people government has asked us to do, and investment in infrastructure renewal of Oakville themselves, who demand we’ve taken a lot of that risk and put it and we will see who provides that lead- the reliability but won’t put up with on the private sector. We are kind of ership. the facility, and had the political clout. plateauing on the system and we won’t And fourth, we can blame crass politi- have a lot of new build in the immedi- How to better manage siting of gen- cal decisions. I think the reality is this ate future. However, at the same time, eration in the future issue is a combination of all of those we have a lot of political turmoil that is Sean Conway asked what went things. clouding decisions - and that is a chal- wrong with the siting of the south- Sean Conway: What can you lenge. west GTA generation plants, and how suggest to help produce a better result Charlie Macaluso, Electricity should a new government deal with for next time based on this unhappy Distributors Association agreed that that kind of problem? experience? there have been quite a few accom- Will Stewart said you can keep Rob Silver: No two projects are plishments in the last 4 or 5 years. the politics out of it by recognizing the same. We have communities near Whether under Liberals, Conserva- warning signs. Press releases about Darlington and Bruce who are begging tives, or the NDP, there are always the Oakville plant mentioned new for new nuclear plants. It’s a pretty

Page  — Excerpt from APPrO 2012, Canadian Power Conference Proceedings: Navigating Turbulent Waters understand the opportunities that plant or that windmill presents for the community; let them understand what it does not present; and let them know the options. Sean Conway: If that community is Rosedale, Oakville, Caledon, Rock- cliffe Park, what do we do? Macaluso: Same answer. Sean Conway: Government policy seems to be “if it’s rural Ontario you take it, and like it or lump it.” If Oakville, Mississauga sneeze, the world stops. There’s clearly a double standard. So what do we do about equity and fairness? Dave Butters: Others have been successful siting plants – Halton Hills, York Energy Centre, and Sithe-Gore- way. For every wind project that is Dave Butters Charlie Macaluso controversial there are three that are unique situation where siting a new built and in operation. So it’s not that have understood. If you’re a munici- nuclear plant is easier than gas. You we don’t know how to do it. We get pality and you have growth, you have 3 might have a new transmission line, bogged down when it looks as though choices to manage this growth within and no local opposition because it’s a decision isn’t really based on rational your area: on an existing corridor. Each project balancing of factors like siting or loca- • Expand your own capacity, wastewa- is unique and it is hard to give a single tion, and appears to have other drivers ter plant answer that will apply in all situations. such as short term political gain. • Contract with a neighbor who has Charlie Macaluso: You can’t excess capacity fool people anymore. You’ve got to be Ensuring adequate capacity by mini- • Stop the growth. honest, tell them the truth, give them mizing second-guessing In the energy space, we’ve got this the pros and cons, and the opportunity Sean Conway: We’ve been talk- culture of plenty and it is inconceivable for them to understand the facts and to ing for 20 to 25 years about increas- that the electrons should be unavail- participate. ing the capacity for both growth and able precisely when and where we need Sean Conway: The evidence is redundancy purposes in the southwest them. Do we need to look at institut- everywhere that the public is increas- GTA. We seem to be having a real ing measures like those in the water ingly skeptical of new power system problem doing that. What advice based sector, rules that say in effect: you’ve proposals. Governments and propo- on experiences at Portland and Gore- got to have a plan to cope with growth; nents have lost legitimacy in the eyes way can be offered, to avoid another and absent a plan, the growth stops. of communities when presenting their calamity like Oakville and Mississau- Are we not creating a real problem for case. Who is going to take the case ga? the people in the energy space because to the jury in the future, to not only Dave Butters: Before selecting there are no consequences for say- be presented, but to win hearts and one particular solution, you have to lay ing no to a power plant while inviting minds? out what the options are. continual growth? Charlie Macaluso: We have ex- Here’s the problem Will Stewart: We have build- tensive hearing processes, and they’re Here are a range of solutions ings full of planners and buildings full complex and hard to fully understand. Talk about costs of regulators. We have two agencies, Is that the process we want? Maybe Talk about consequences, land arguably, that work on planning. We yes, in some cases, maybe not in other value, etc. have a crown corporation that gener- cases. We need a more robust discussion ates this stuff. We have countless We need to rebuild trust with the along those lines with people, and private sector operators who build this people, you have to give them honesty, frequently we don’t have that. stuff. Why does the government need you have to get into the communities Sean Conway: If this were a water to be involved? I think the problem is with information on the ground and or wastewater issue, there is a very in the siting. Just up the street from let them engage in dialogue. Let them simple protocol that everyone would the Oakville plant is the Halton Hills

Excerpt from APPrO 2012, Canadian Power Conference Proceedings: Navigating Turbulent Waters — Page  Political issues (Cont.) have been different if Enersource were 2) Honesty is critical. There may plant. It was in the middle of nowhere building the plant instead of Eastern, have been some optimism over the on a transmission corridor. I think but noted that Enbridge is doing a To- timeline for shutting down coal, but that the best way to reduce the role ronto reinforcement and doing a good the costs and benefits were handled played by politicians and bureaucrats job of consulting with the community frankly with the public. The promises is to make better use of the systems on it. Portlands was also at risk of over the Green Energy Act were less that we already have in place to prop- being unpopular, but TransCanada frank. It was a mistake to say it would erly site and regulate these things. managed relations with the community only cost 1%. It was a mistake throw- Dave Butters: I’m going to have well. ing out a job number that may have to disagree with Will on part of that. Sean Conway read a question been optimistic. I think you could There were only a limited number of from the audience about satisfying have sold it better if there was a bit places where you could have put that increasing levels of demand. Whose more frankness. plant, absent Lakeview, to serve the job is it to tell the public, he asked, that needs of the western part of the GTA. “the needs of the many may, in fact, The use of directive powers You need transmission access, you outweigh the concerns of the few?” Sean Conway asked: Is the use of need gas, and so forth. There was a Will Stewart: You need politi- directive power excessive? competition, we asked private sector cians to speak honestly. The Green Rob Silver: Under the first IPSP developers to find the best spot, Tran- Energy Act is going to create 50,000 there was supposed to be no more sCanada eventually won out with its jobs? The total cost of moving the directive power by this stage in the Oakville site. The site actually wasn’t Oakville power plant is $40 million? process. There would be only sup- that close to anything: As a matter of These were not good examples of com- ply-mix directives, and overall policy fact, the Ford plant is nearby. munication. would have been that expressed by the We got the private sector in this Second, you need proponents to Minister. It would have been primarily business in the first place in order educate the local population on what the OPA subject to approval by the for them to figure out where to put it means for them. The onus for that OEB that would have made decisions these things and them to take the risk. is on everyone in the room. The at this point. History happens however Companies would then rise and fall proponent, the sector as a whole, the - you can’t put the genie back in the based on their ability to assess risk. LDCs, the Ontario Energy Association, bottle. The model was not based on having APPrO, all have to do more on that Sean Conway: They put in some the government second-guessing them. front. And it’s the people’s job to hold separation between the agencies and I think we have a good process and it’s politicians accountable and not let the political level, they delegated some turned out well. Where we’ve fallen them get away with press releases that of the very difficult decision-making to afoul on these things is where external are intentionally misleading. experts on various panels and agen- parties start to second guess the proc- Charlie Macaluso: I think in cies. Then, they went right back to ess. Ontario the politicians carry a lot of their political sinning ways which em- duties in terms of what happens in broiled them in all manner of trouble. Building relationships with customers energy policy. They have to take some How and why does that happen? and other solutions for social license of the responsibility for making deci- Dave Butters: Why do politicians Charlie Macaluso: We have lo- sions which weigh the needs of the act the way they do? Clearly, it is the cal utilities, and they have the highest masses. We need to know what the responsibility of our elected officials rated relationship with the customer. issue is. I think it’s about the pros and to look out for the public good. And it We have the best opportunity to un- cons of siting the wind farm, and the is incumbent upon them to be honest, derstand some of the issues customers broader energy sector needs to come forthright and transparent, and to talk face and what some of their concerns and explain that. Also, to explain why about the options and the balance and might be, but we’re not involved in that it should or shouldn’t happen. I don’t let others get on with it. But we have process. We need to be smart about us- know whether there is one particular a very short-term political horizon ing some of the tools we already have. person but ultimately the sector has to here in our country and the projects The planners and regulators don’t stand behind the initiative it’s pursu- we’re talking about are long lead-time understand or have a relationship with ing and be honest with the people. projects so we’re out of sync. I think the customer. LDCs have mechanisms Rob Silver: Two answers: 1) We Tim Hudak question, “should the to take advantage of that relationship, need to decide as a province who is government be in the electricity busi- and it’s an underused opportunity in taking the regulatory risk, the political ness?” is a valid question and should some of the current processes. risk, and whose job it is to obtain the be up for public discussion. Rob Silver expressed some doubt social license – the proponent, or the that the outcome in Mississauga would government. Right now it’s not clear.

Page  — Excerpt from APPrO 2012, Canadian Power Conference Proceedings: Navigating Turbulent Waters Political issues (Cont.)

What are the top issues? with them. So for the Liberal Party issue that will attract front-page atten- Conway, presenting a question typically, health and education would tion, however meritorious the policy from the floor, asked: What is the sin- be sword issues and taxes would be a might be? gle most significant or serious policy shield issue. Electricity policy is typi- Rob Silver: I think it will at- issue in the energy space over the next cally a shield issue for a government. tract some attention, but it will be a 12 months that government must con- In the best case scenario, nobody is miniscule fraction as compared to front? talking about it and you escape without some of the Ontario electricity issues. Will Stewart: Regulatory uncer- having to address the issue. There was The mere notion of transferring what tainty. For the people in this room, a very conscious decision by the Party, may be a natural gas pipeline into an there’s a high degree of uncertainty as the Campaign, and by the Government oil pipeline, or reversing a pipeline, I to how many approvals and what type to turn electricity into a sword issue. think it will not become a major na- of approvals do you actually need to The Green Energy Act and others were tional or provincial debate. get, above and beyond the legislative attempts to turn it into a positive for Dave Butters agreed. The Tran- and regulatory approvals. There’s no the party to run on, which is unusual. sCanada mainline is on the ground guarantee at any point in time in this The best thing would be to keep the and has been operating for around 50 sector that a “yes” from seven people conversation low-key. years. There will probably be some doesn’t also mean that you need a Dave Butters agreed with Rob local concerns that I’m pretty certain “yes” from three other people. Silver, saying that the key is to calm that TC Energy knows how to address. Charlie Macaluso: Two words: the topic down; continue on with what The controversial part will be this: Global Adjustment. I’ve been in this needs to be done. However, there are Where are the refineries are located business a long time and even I don’t complications: a , and who gets the money? TC says it’s understand global adjustment. I don’t and the Liberals need to choose a new practical and feasible. know what it is. I don’t know what’s in leader. As long as it’s on the front page Will Stewart: The NDP’s argu- it. I don’t know who decides what goes and is controversial, it is difficult for ment is inconsistent. If you want more in there, I don’t know when it’s going governments and anyone else to be refineries, how are you going to get the to end, and I know it’s a big number. truly rational about what needs to be stuff from where it is in the ground to Rob Silver: I’ll give a politi- done. Electricity shouldn’t be a front the refinery if not by pipeline? cal answer. Political issues are either page issue. sword issues or shield issues. Sword Sean Conway: The leader of the Government intervention issues are the type that you try to national opposition flew to Calgary in Sean Conway: Alright let’s get drive a campaign with, whereas with recent weeks and said he supports the to Tim Hudak’s question. What is shield issues you’re never going to win flow of Western Canadian bitumen to the appropriate role for Her Majesty’s a campaign but you defend yourself Eastern . Will that not be an provincial government in Ontario in

Excerpt from APPrO 2012, Canadian Power Conference Proceedings: Navigating Turbulent Waters — Page  Political issues (Cont.) sure, other than some kind of political next big decision by the next govern- shield, why Mr. Hudak has taken all ment. the electricity sector? other options off the table. Will Stewart: Infrastructure Charlie Macaluso: The province Dave Butters: I think if the gov- renewal is always going to cost money. has a longstanding history of signifi- ernment is going to be involved in the We’ve had some social engineering cant public involvement in the energy electricity sector and own assets, we programs that are going to drive up sector. To go 180 degrees on that need to let those companies operate as the price of electricity. Stop treating would be foolish for any party. How- commercial entities. Don’t put them the electricity sector as an instrument ever, that is not to say there isn’t room in strait jackets and expect them to of social policy and move it back to an for more private sector involvement. implement partial reforms. instrument of economic policy. We have indicated that the timing is Rob Silver: [to Will Stewart] right in our sector to introduce private Managing costs Would you reopen the coal plants? participation in the distribution sec- Sean Conway: What specific Will Stewart: No, I don’t think tor. Up to 49% would be a good start. advice would you give policy makers to it is effective means to go back and try The timing is right for a number of manage the cost curve in the coming and build new coal plants. There are reasons. We need reinvestment in the years? better ways to get new generation. infrastructure; we need the option of Dave Butters: You’ve got to look Sean Conway (question from the private participation. Whether through at other parts of the sector for efficien- floor): Has the time come for Ontario public pension plans, pure investment cies and savings. There are none to to stop using its energy resources, es- bankers, whatever it is, we need to be be had on the generation side. Those pecially electricity resources, as a tool open with the public. assets are what they are; the fuel costs for economic and industrial strategy/ Will Stewart: The proper role for are what they are. The only thing development? the government is to propose the rules, you can do is stop building new stuff, Dave Butters: No, I don’t think consult on the rules, implement the because that’s going to go to the global so. Electricity has always been part rules and stick to the rules — then get adjustment. If you want to bend the of the economic strategy of Ontario.