Chapter 3 Ministry of Energy Section 3.05 Electricity Power System Planning 1.0 Background 1.2 Key Players Involved The entities involved in power system planning in Ontario include the Ministry of Energy (Ministry), 1.1 What Is Electricity Power the Independent Electricity System Operator System Planning? (IESO), the Ontario Energy Board (OEB), Ontario Electricity power system planning involves man- Power Generation (OPG), Hydro One, a major aging the long-term demand for electricity and transmitter and distributor (see Section 3.06 of deciding how to meet that demand through vari- this year’s Annual Report for our audit of Hydro ous generation, conservation and transmission One’s Management of Electricity Transmission solutions: and Distribution Assets), four other small licenced Generation—Ontario has a diverse mix of transmitters and approximately 70 local distribu- Chapter 3 • VFM Section 3.05 • energy sources (called the “supply mix”) tion companies. Figure 1 shows the key roles and including nuclear, hydropower, natural gas, responsibilities of each. wind, solar and bioenergy. The Ministry and the IESO are the key players in • Conservation—Ontario encourages consum- power system planning at the provincial level. Their ers to reduce or shift consumption away from plans aim to ensure adequate supply, bulk transmis- peak times and to use energy more efficiently, sion planning and interaction with local distribu- with the intent to avoid the need for increased tion companies. Under the Electricity Act, 1998, the electricity generation and to avoid or defer the Minister has the authority to issue directives (which need for significant investment in new electri- require cabinet approval) on the supply mix, and city infrastructure. directions (which do not require cabinet approval) • Transmission—Ontario’s transmission system on other matters relating to electricity planning. moves electricity at high voltages over long The January 1, 2015, amalgamation of the distances, from generation sites to the local Ontario Power Authority (OPA) and the IESO came distribution companies who deliver electricity about through an amendment to the Electricity to consumers. Act, 1998, which made the new IESO responsible for power system planning. Before the amalgama- tion, the OPA had been responsible for conducting independent planning for electricity generation, 206 Electricity Power System Planning 207 Figure 1: Roles and Responsibilities of Key Entities Involved in Electricity Power System Planning Prepared by the Office of the Auditor General of Ontario Ministry of Energy • Sets policy direction for Ontario’s electricity sector • Produces Long-Term Energy Plan (LTEP), which provides the overall energy policy framework for the province • Directs certain aspects of planning and procurement of electricity supply through ministerial directives and directions Technical Direction Direction advice and guidance and guidance Independent Electricity System Operator Ontario Energy Board (merged with Ontario Power Authority on January 1, 2015) Electricity Sector Regulator • Conducts independent planning for electricity generation, Approve • Licenses all market participants, including IESO, generators, demand management, conservation and transmission technical plan transmitters, distributors, wholesalers, and electricity • Produces the Integrated Power System Plan (IPSP), the retailers technical plan informing Ministry’s policy priorities • Reviews and approves Integrated Power System Plan (IPSP) • Signs power supply contracts with generators for • Sets transmission and distribution rates in the electricity procurement of renewables, gas and certain Technical plan sector submission nuclear resources • Sets the rate for the Standard Supply Service for distribution • Publishes status updates on the Ministry’s progress in utilities that supply electricity directly to consumers implementing Long-Term Energy Plan • Reviews rates for nuclear power from Pickering and • Leads planning at regional level Darlington Power Generating Stations and for some of • Oversees, approves and funds LDC conservation plans and the hydro power produced by Ontario Power Generation programs; also responsible for demand response • Approves the IESO’s budget and fees • Oversees transmission and distribution-system investments • Oversees regional planning process • Monitors the requirement for LDCs to deliver conservation Oversight on Collaborate Collaborate with IESO Rate filing Licensing conservation on regional and Ministry on Review rates applications and programs planning nuclear refurbishment for cost recovery regulating Ontario Power Generation • Provincially owned electricity company that runs nuclear Chapter 3 • VFM Section 3.05 and hydro power plants and produces more than half of Ontario’s electricity • Partners with Ontario’s First Nations and Metis communities on hydroelectric projects • Collaborates with Ministry and IESO on planning for the refurbishment of nuclear units at Darlington Nuclear Generation Station Supports transmission needs for OPG and other power generators Hydro One (transmitter) (currently being privatized through a sale of up to 60% of shares) • Owns and operates 96% of Ontario’s transmission lines. The remaining 4% is owned by other transmission companies such as Great Lake Power, Canadian Niagara Power, Five Nations Energy Inc. and Cat Lake Power Utility • Leads planning at regional level when transmission solution is required to meet needs • Largest local distribution company in Ontario Local Distribution Companies (including Hydro One local distribution business) • Distribute electricity to business and residential consumers • Lead planning activities related to distribution systems inlocal service areas • Deliver conservation programs 208 2015 Annual Report of the Office of the Auditor General of Ontario conservation and transmission in Ontario. The OPA coal-fired generation with cleaner renewable energy was also responsible for developing an Integrated sources, such as wind, solar, biomass and hydro- Power System Plan (IPSP), a plan for achieving electricity. At that time, about a quarter of Ontario’s the province’s energy goals over a 20-year period. electricity was supplied by coal. The OPA noted that Appendix 1 summarizes the key events relating to the sources of power that would replace coal should power system planning in more detail. be cleaner, but to maintain system reliability they At the regional level, the IESO, Hydro One, should also have characteristics similar to coal— four other small licenced transmitters and approxi- flexibility and sustained production of energy. mately 70 local distribution companies jointly Between 2003 and 2014, Ontario eliminated evaluate the needs of 21 electricity regions spread 7,546 megawatts (MW) that came from coal and over 10 transmission zones in Ontario and plan for added 13,595 MW of new capacity (6,580 MW of how to meet those needs. Hydro One and approxi- renewables, 5,674 MW of natural gas and 1,341 MW mately 70 local distribution companies across the of nuclear) to the supply mix. Figure 2 shows how province are also responsible for assessing the cur- Ontario’s supply mix has changed since 2003 and rent distribution system and delivery of electricity projects what the supply mix will look like in 2032. in their service areas. Procurement of Renewable Energy Sources As the regulator of the province’s energy sector, Before 2009, the OPA procured renewable energy the Ontario Energy Board (OEB) is supposed to through competitive bidding and a guaranteed- play a significant role in power system planning, price program that provided fixed prices to renew- including reviewing and approving technical plans able generators. These procurement efforts were (although this role has been diminishing, as will be successful and renewable generation targets were discussed further in this report). achieved in record time. The OEB’s other responsibilities include licens- In 2009, upon the passing of the Green Energy ing and overseeing energy companies, including Act, the Ministry directed the former OPA to create a utilities, generators and electricity retailers that new guaranteed-price program (called “FIT,” which offer energy under contract; approving the rates stands for “feed-in tariff”) to promote greater use Chapter 3 • VFM Section 3.05 that utilities can charge their customers (through of renewable energy sources like wind and solar for public hearings); writing rules and guidelines for new electricity-generating projects. Compared to the companies it licenses and rate-regulates; setting the previous program, the new guaranteed-price time-of-use prices and times; providing information program was wider in scope and offered generators and tools to help consumers make informed choices significantly higher prices. Initially, the Green Energy about energy matters; and approving new construc- Act required guaranteed-price renewable projects tion of or changes to existing natural gas pipelines to have made-in-Ontario components, but the gov- and storage facilities, and electricity transmission ernment amended the legislation following a 2013 lines that are more than two kilometres long. World Trade Organization ruling. As a result, made- in-Ontario components are no longer required for 1.3 Ontario’s Changing Supply Mix guaranteed-price renewable projects with contracts signed after July 25, 2014. The guaranteed-price The supply mix is the combination of power sources program is divided into two streams: