The Ontario Energy Board’s 2024-2027 Business Plan: The Said and the Unsaid
April 18, 2024
By
Roy Hrab & Travis Lusney
On April 10, 2024, the Ontario Energy Board (OEB) published its 2024-2027 Business Plan (Plan), setting out key activities, priority initiatives and budgets for 2024/25 through 2026/27.
The Plan presents programs and initiatives under the OEB’s four “Strategic Goals”: Enable Ontario’s Energy Advantage (which replaces the previous Top Quartile Regulator goal), Protect the Public, Drive Energy Sector Performance and Facilitate Innovation.
Implementing recommendations of the Electrification and Energy Transition Panel (awaiting further direction from government)
Protect the Public
Intervenor Process: Continuing with the 2022 Intervenor Action Plan and a September 2024 report back to the Minister that will explore, among other things, the adoption of a consumer advocate model and the capping of intervenor costs
Examining the potential regulatory landscape for future utility business models
Advancing electricity and natural gas conservation through developing a “one-window” approach for low-income and residential CDM/DSM programs, working with the IESO and Enbridge and reporting back to the Minister in April 2024
Providing guidance on changes needed to the OEB’s CDM Guidelines (now the Non-Wires Solutions Guidelines) to reduce barriers to LDC conservation activities as outlined in the IESO-LDC Working Group report
Along with its Plan, the OEB also published the letter from the Minister of Energy (dated April 4, 2024) which approves the plan and notes that:
The April 2024 DSM/CDM report back should include details on how the OEB will consult on the single delivery model and address the IESO-LDC Working Group Report
The OEB should provide more information on how it will provide LDCs with clear direction on planning for EVs based on the EV Delivery Rates Report
The OEB is to inform the Ministry on red tape reduction (RTR) progress as well as provide the Minister with RTR updates, upon request, for the Ministry of Red Tape Reduction’s annual reporting
The OEB is to provide the Minister with regular updates as it executes the 2024-2027 Plan
In fact, almost all the projects in the Plan are either ongoing and/or announced previously. The Plan itself does not provide additional detail regarding how the OEB will execute on most projects (e.g., milestones and measures). Instead, the Plan advises readers that “Details on non-adjudicative projects and project specific implementation plans are publicly available on our Engage with Us website (engagewithus.oeb.ca).”
However, there are some new and previous initiatives contained in the Plan where stakeholders would benefit from more concrete details regarding timelines, milestones, and how engagement will occur. Two examples of this are:
The OEB’s work to investigate Future Utility Business Models is of significant interest to many energy sector stakeholders and would particularly benefit from implementation details. The Plan contains high level references to the project, but lacks project-specific details, such as deliverables and milestones. This omission is somewhat surprising because (1) there are several ongoing distribution system operator (DSO) pilots being conducted; and, (2) the meeting notes from the IESO’s December 14, 2023 Transmission-Distribution Coordination Working Group state the OEB provided an update to the effect that “the OEB has engaged a consultant to advise on regulatory considerations pertaining to DSOs [Distribution System Operator].” However, the Plan itself makes no reference to the DSO pilots, the engagement of a consultant, or that the OEB is exploring DSO models
Further, the need to explore Future Utility Business Models now is underscored by the recent adoption of Non-Wires Solutions (NWS) obligations for distributors. There is a need to address the gaps in the current utility business model so that Ontario is able to leverage NWS opportunities to meet system needs cost-effectively, particularly as large and growing capacity and energy needs are emerging, that will require many different resources to maintain cost-effectiveness of the electricity system. Also, the IESO has procured multiple distribution-connected energy storage resources that should be integrated into distribution system operations to maximize their benefits to the local and bulk electricity system.
The Plan states that the OEB is continuing with the Dynamic Pricing Pilot for Non-RPP Class B Electricity Consumers “as we design and implement a dynamic electricity pricing pilot to assess the benefits for Class B consumers that don’t pay Regulated Price Plan (RPP) prices.” However, the last public communication by the OEB for this project was in August 2023, in which the OEB stated that “No draft nor final applications were received by the deadline […] We are developing new options for assessing alternatives to the commodity pricing structure and expect to provide an update shortly.” As a result, is it not clear what revised activities, milestones, stakeholder process the OEB is planning to undertake with respect to this initiative given that the originally envisioned pilot projects did not materialize.
The Missing Piece: Market Renewal
As with any business plan, what is not identified can be just as, if not more, important as what is discussed. In the Plan, there is conspicuously no mention of the IESO’s Market Renewal Program (MRP), expected to go live in May 2025, and its implications for the sector. MRP will introduce the most “fundamental reforms” to the Ontario electricity market since market opening. Market design changes will require guidance and support from the OEB in a number of areas, and the OEB has recently provided guidance to electricity distributors on expected amendments to the settlement provisions in the Standard Supply Service Code and the Retail Settlement Code.
Given the foundational changes MRP will bring and that the IESO delayed the initial November 2023 implementation date, one would expect the OEB to include preparing for, and having the resources in place, to ensure a smooth, fair and equal transition to the next generation of Ontario market design as a key project in its Business Plan for the 2024-27 period. For example, under the Electricity Act, 1998, the OEB has the authority to revoke market rule amendments and refer the amendment back to the IESO for further consideration. There is a chance that a market participant could challenge the rule changes passed by the IESO for MRP, which would require the OEB to be prepared to review and adjudicate complex market design issues on short notice. Alternatively, the OEB could commence a proceeding on its own motion to undertake a review of MRP-related market amendments. The absence of any reference to MRP, given the magnitude of the project and its impending completion, is therefore quite surprising.
The Broader Policy Context
Of greater significance is that this Plan and the Minister’s April 4, 2024 letter of approval arrive during a contentious and awkward time in the OEB-Government of Ontario relationship. Specifically, in December 2023, the Minister criticized the OEB’s December 2023Phase 1 Decision and Orderin the Enbridge Gas Inc. proceeding to set 2024-2028 rates, pledging to pause and reverse the decision as it related to the revenue horizon for new residential connections.
This led to the Minister introducing Bill 165, Keeping Energy Costs Down Act, 2024 in February 2024, which (when passed) will give the Minister the time-limited authority to prescribe regulations setting the revenue horizon over which natural gas utilities calculate the upfront cost required for new natural gas connections for residential, small commercial and other customers. The legislation includes other new powers, including authorizing the Minister to issue directives requiring the OEB to hold a generic hearing to determine any matter respecting natural gas or electricity.
Further, the Minister also stated his intention to “appoint a new chair of the OEB this spring with the expectation that the board and commissioners conducts appropriate consultation – in line with the proposed legislative requirements – before reaching decisions that support the objective of an affordable, reliable, and clean energy system.”
Neither the OEB’s Plan (e.g., in the “Environmental Scan” section) nor the Minister’s April letter of approval make any acknowledgement of the highly unusual events that have transpired since the OEB's release of its Enbridge Phase 1 decision.
As a result of not acknowledging the challenging OEB-government relationship dynamic, there are some specific elements of the OEB’s Plan that will likely be viewed with concern by stakeholders as they relate to perceptions of the OEB’s independence and performance, for example:
The Plan states the OEB has achieved its aspiration of becoming a “Top Quartile Regulator” and “has closed our Top Quartile Regulator goal;” however, the specific details of how this determination was reached, such as the metrics used and the regulator comparators the OEB ranked itself against, are not provided in the Plan. Furthermore, transitioning this objective from being a “top quartile regulator” goal to “enable Ontario’s energy advantage” – as the OEB is doing – could be interpreted by some stakeholders that the OEB’s pursuit of regulatory excellence has been replaced by enabling government policy objectives.
The Plan presents a new performance measurement framework for the OEB with a new scorecard “designed to capture important work and outcomes for the OEB.” This new framework has removed some previous measures, most notably “Stakeholder rating of independence” and “Stakeholder satisfaction”. An explanation of why these metrics were removed is not provided in the Plan. Again, in the absence of an explicit rationale, these exclusions are left open to stakeholder interpretation within the current OEB-government context.
To be clear, the OEB’s recent Business Plan has been released into a fluid, complex, and controversial policy and regulatory environment regarding the future of Ontario’s energy system. There are many upcoming events that may influence the contents of the Plan as well as how the OEB executes the Plan and its core adjudicative functions, such as:
The Standing Committee of the Interior completed its clause-by-clause consideration of Bill 165, which will now return to the Legislature for Third Reading and the (expected) passage into law.
The incoming Chair of the OEB’s Board of Directors is expected to be named soon and that appointee will likely usher in changes to the structure and operations of the organization given the Minister’s expectations.
There is the upcoming OEB decision on the 2023 Panhandle Regional Expansion Project, which is being built to supply gas to new and expanded gas-fired generation, as well as service the growing greenhouse sector. One potential outcome of the Panhandle proceeding is gas-fired generators and other customers having to pay an up-front capital cost, which is historically not how natural gas transmission projects have been funded in Ontario. The province has been clear that it wants the line to be built and that the customers should not be required to make an upfront capital contribution. In fact, Bill 165 as proposed, states that if “the Board makes an order refusing to grant leave to construct a proposed natural gas transmission or dual-purpose transmission and distribution line or an order granting leave to construct such a line subject to a condition that a contribution in aid of construction by natural gas consumers is required, the Minister may issue, and the Board shall implement, a directive […] requiring the Board to rescind the order and hold a new hearing of the application.”
