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Energy Regulatory Update (Q1, 2025)

Post author By admin
Post date April 3, 2025
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We’re pleased to share the Q1, 2025 edition of the Shepherd Rubenstein Energy Regulatory Update, our summary of key developments in Ontario’s energy sector between January and March (and the first few days of April). This quarter was marked by heightened uncertainty caused by the ongoing trade dispute with the United States. The Ontario provincial election led to a temporary pause in many regulatory initiatives, while the recent launch of the federal election campaign has added further complexity to the evolving energy policy landscape heading into Q2.

Trade War

The escalating trade war between Canada and the United States has had direct implications for Ontario’s energy sector.

In January, the Ontario government introduced its Fortress Am-Can plan, aimed at promoting energy security and economic growth on both sides of the Canada-U.S. border. In early February, President Trump issued an Executive Order imposing tariffs on all Canadian imports (10% on energy and 25% on all other goods). These tariffs were subsequently paused for 30 days.

In anticipation of the pause expiring, the New York Independent System Operator (NYISO), which is interconnected with Ontario, filed a tariff revision with the Federal Energy Regulatory Commission (FERC). The filing proposed a mechanism to recover the costs of potential tariffs on Canadian electricity imports, if applicable. NYISO’s view is that under existing legal precedent, tariffs apply only to tangible goods, and therefore electricity, as an intangible product, should fall outside the scope of the Executive Order.

On March 4^th, the United States implemented an Executive Order imposing the previously paused tariffs. The order was later amended to temporarily exempt goods compliant with United States-Mexico-Canada Agreement (USMCA/CUSMA). In response, the Ontario Government announced on March 10^th that it would apply a 25% electricity surcharge on exports to the United States. This measure was implemented by filing Ontario Regulation 25/25 under the Electricity Act and through a letter directing the IESO to urgently amend the Market Rules to apply a surcharge of $10 per megawatt-hour, reflecting approximately 25% of the average value of electricity exports. That day, the IESO implemented an urgent Market Rule amendment requiring it to administer a charge on all export transactions to the United States, based on the amount specified in a request from the Minister of Energy and Electrification. The following day, following discussions with the United States government, the Minister directed the IESO to suspend the surcharge by setting the charge amount to zero.

In a separate February announcement, the United States imposed a 25% tariff on steel and aluminum imports, effective in mid-March. Later in March, it also announced a 25% tariff on automobile imports and parts, effective April 3^rd (there is an ability for importers to exempt United States content to reduce the tariff on CUSMA originating vehicles and parts). Both measures are expected to disproportionately impact Ontario. In response to the broad-based tariff announcement and the specific tariffs on steel and aluminum, the Federal Government announced retaliatory tariffs on a range of imported products. It also launched a consultation on potential further retaliatory tariffs on imported goods from the United States, which include several energy-related items such as electricity transformers, insulators, wiring, and steel and plastic pipes used in natural gas infrastructure.

On April 2^nd, the United States announced differentiated tariffs on countries around the world, with a minimum rate set at 10%. These new tariffs will not apply to Canadian (and Mexican) imports that are CUSMA-compliant, in accordance with previous Executive Orders. Non-compliant goods will be subject to a 25% rate, and a 10% rate will apply to energy and potash. On April 3rd, in retaliation for the implementation of previously announced auto tariffs, the Federal Government announced a 25% counter-tariff on United States made cars not compliant with CUSMA

Ontario Energy Board

The OEB issued a number of notable decisions over the last few months, including:

Adopting a new Cost of Capital Framework for regulated utilities, including, among other matters, setting the 2025 return on equity (ROE) at 9% (a reduction of 25 bps from the status quo) and maintaining the existing deemed capital structures.
Dismissing an application by a group of non-quick start gas-fired electricity generators seeking to remove the Market Rule amendments implementing the IESO’s Market Renewal Program. The OEB rejected the claim that the amendments were unjustly discriminatory and inconsistent with the purposes of the Electricity Act.
Granting Enbridge Gas leave to construct the St. Laurent Replacement Project. The project, which involves the replacement of approximately 18 km of pipeline in Ottawa, had previously been denied by the OEB in 2022.
Determining several outstanding issues as part of Phase 2 of the OEB’s generic hearing on Uniform Transmission Rates (UTRs).
Approving 50% of Lakefront Utilities’ request for an Incremental Capital Module (ICM) related to a distribution substation. The OEB determined that the remaining 50% would be recorded in a deferral account, with recovery contingent upon specific undertakings related to an evaluation demonstrating the prudence of the selected solution and that the project results in measurable reliability enhancements.
Denying Algoma Power’s request for the OEB to order the IESO to correct a prior settlement error, finding that the shareholder should bear the cost. This was the first OEB decision to interpret the limitation provisions under section 36.1.1 of the Electricity Act.
Approving, with modifications, Enbridge Gas’s application for its Integrated Resource Planning (IRP) pilot project, the Southern Lake Huron Pilot Project. As part of the Decision, the OEB rejected funding for hybrid heating and natural gas heat pumps, and directed that those funds be reallocated to electrification measures. On the same day the decision was released, the OEB initiated, on its own motion, a review raising several questions regarding the correctness of the decision.
Declining to approve a Settlement Proposal filed in Enbridge Gas’s annual deferral and variance account disposition proceeding, citing concerns related to the fugitive emissions component of the agreement.
Issuing the 2025 Uniform Transmission Rates (UTRs).

Notices of Amendments to various codes were issued, including:

Final amendments to the Distribution System Code (DSC) establishing minimum requirements for electricity distributors when communicating with customers during widespread power interruptions caused by severe weather.
Proposed and Final amendments to the Retail Settlement Code (RSC) and the Standard Supply Service Code (SSSC), to facilitate implementation of the IESO’s Market Renewal Program.
Final amendments to the Unit Sub-Metering Code (USM Code) intended to increase awareness of the consumer protection framework applicable to customers of unit sub-meter providers.
Proposed and Final amendments to the Transmission System Code (TSC) aimed at better facilitating the connection of energy storage by introducing “storage customer” as a third category of customer that can connect to the transmission system.

The OEB announced a consultation on Distribution System Operator (DSO) capabilities, with a focus on ensuring that their introduction delivers value for customers. It also announced a consultation to support a review and evaluation of its Integrated Resource Planning Framework for Enbridge Gas.

As part of the Distributed Energy Resources (DER) Connection Review initiative, the OEB revised the Distributed Energy Resources Connection Procedures (DERCP). The revisions aimed to address customer concerns, enhance access, standardize connection practices, and simplify processes to reduce connection costs and timelines. OEB Staff also issued a letter reminding electricity distributors of their obligations under the Electric Vehicle Charging Connection Procedures (EVCCP).

A letter was issued providing guidance to electricity distributors in incorporating innovation-related proposals in rate applications. The OEB also updated its performance standards for Mergers, Acquisitions Amalgamations and Divestitures (MAADs) applications.

In January, the OEB released its Draft Report for comment on its proposed Electric Vehicle Charging Rate (EVC Rate), incorporating feedback received on its earlier proposal last year. At the end of March, the OEB released the Final Report, incorporating feedback received on the Draft Report.

As part of its Reliability and Power Quality Review (RPQR), the OEB announced the introduction of reliability performance targets. Developed in consultation with the RPQR Working Group, these targets will be included in electricity distributors’ performance scorecards beginning with applications for rates effective in 2027.

The OEB issued a letter, in conjunction with the release of the OEB Staff report, reviewing Enbridge Gas’s 2024 Annual Update to its natural gas supply plan. As part of the letter, the OEB adopted a process change for the consideration of future gas supply plans and accepted the OEB Staff recommendation that the next five-year gas supply plan (to be filed in 2025) be adjudicated by a panel of commissioners, with subsequent annual updates to continue to be considered through stakeholder consultation.

A generic deferral and variance account (DVA) for electricity distributors was established to record the incremental revenue requirement impacts resulting from reductions in forecasted customer capital contributions embedded in distribution rates. These reductions arise from previously implemented changes to the connection and revenue horizon for housing developments.

Assurances of Voluntary Compliance (AVCs) were entered into with Orangeville Hydro Limited regarding non-compliance related to Class A Global Adjustment under-billing and loss adjustment errors. As part of accepting the AVC, the OEB directed the IESO, notwithstanding the limitation period, to refund Orangeville Hydro for the billing error. AVCs were also entered into with GC Project and Atlantic Packing Products for operating in the electricity market without a retailer or wholesaler license, respectively.

The OEB released its Intervenors and Regulatory Efficiency report, which was sent to the Minister of Energy and Electrification. The report was developed in response to the 2023 Letter of Direction to the OEB, and its Action Plan is referenced in the Minister’s 2024 Letter of Direction.

At the beginning of April, the OEB launched two consultations to inform ratemaking for electricity distributors. The first is a review of the use of total cost benchmarking in assessing the overall cost performance of electricity distributors, which is used as part of the price cap index X-factor. The second is a review of electricity distributor spending patterns.

Independent Electricity System Operator

In early January, the Ontario Government announced a new 2025-2036 Energy Efficiency Framework (Enhanced DSM (eDSM) Framework) to be launched by the IESO. The new 12-year framework budgeted and approved through a procurement directive will cost a total of $10.9 billion, with each 3-year eDSM plan costing $3.2 billion. The framework includes 12 continuing or expanding programs and 2 new programs, the Home Renovation Savings Program, and Small Business Peak Perks. Notably, the framework features an expanded Local Initiative Program and a requirement to deliver residential and low-income programs with Enbridge Gas through a single delivery window. The Ontario Government also directed the IESO to implement beneficial electrification measures aimed at promoting electrification and the use of electricity to reduce emissions.

The Ontario government announced that it is advancing pre-development work for the proposed Ontario Pumped Storage Project (a partnership between TC Energy and the Saugeen Ojibway Nation). The Minister of Energy and Electrification issued a directive to the IESO to finalize and enter into an agreement with TC Energy to recover expenses associated with the pre-development work.

The IESO released the April 2025 to September 2026 Reliability Outlook.

Legislative and Regulatory

The Ontario Government approved Ontario Power Generation’s (OPG) plan to proceed with the next phase (project definition) of the refinement of the Pickering Nuclear Generating Station’s “B” units. The Minister of Energy and Electrification also proposed amendments to Ontario Regulation 53/05 under the Ontario Energy Board Act, clarifying the scope of what can be recorded in the Pickering B Extension Variance Account.

The Ontario Government also asked OPG to explore opportunities for new nuclear generation at its Wesleyville site, following expressions of interest from the Municipality of Port Hope and the Williams Treaties First Nations (WTFN). It also expressed support for OPG’s $2 billion plan to refurbish and expand hydroelectric generating stations across Northern Ontario.

The Ministry of Energy and Electrification proposed an amendment to Ontario Regulation 735/20, under the Electricity Act, to use the proceeds from the Future Clean Electricity Fund (where proceeds of the Clean Energy Credits from OPG and the IESO are held) to offset the Global Adjustment costs arising from non-emitting electricity generation approved by the IESO.

With the swearing in of the new cabinet in March, the Ministry of Energy and Electrification was renamed the Ministry of Energy and Mines to reflect the expanded responsibilities.

The Associate Minister of Energy-Intensive Industries announced a new round of funding of up to $3M from the Hydrogen Innovation Fund.

Federal Government

The Federal Government announced $55 million of funding from its Environment and Climate Change Canada’s Future Electricity Fund (FEF) to OPG to support the predevelopment activities for the next three proposed small modular reactors (SMR) at its Darlington site.

In late March, the Federal Government effectively eliminated the consumer Federal Carbon Charge through a regulation amending Schedule 2 of the Greenhouse Gas Pollution Pricing Act and the Fuel Charge Regulation, setting the charge amount to zero after March 31, 2025. Subsequently, the OEB approved applications by both Enbridge Gas and EPCOR to reflect the change in rates charged for customer commodity consumption as of April 1st.

The Federal Government also announced the doubling of the indigenous Loan Guarantee Program from $5 to $10 billion.

The Canadian Nuclear Safety Commission (CNSC) issued its Record of Decision of its recent approval to extend the operation of Pickering Nuclear Generating Station Units 5 to 8 until the end of 2026.

Judicial

In Kebaowek First Nation v. Canadian Nuclear Laboratories, the Federal Court granted, in part, the Kebaowek First Nation’s application for judicial review of a CNSC decision authorizing the construction of a Near Surface Disposal Facility (NSDF) at Chalk River. The Federal Court found that the Commission erred in law by concluding it lacked jurisdiction to consider the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) and its implementing legislation, in assessing the Crown’s duty to consult and accommodate. It held that the UNDRIP is now part of Canadian law and must inform the interpretation of section 35 of the Constitution Act, 1982. The Federal Court emphasized that while UNDRIP does not create new rights or a veto, it is an important interpretive lens for reconciliation and meaningful consultation.

The Alberta Court of Appeal in FortisAlberta Inc v Alberta Utilities Commission, granted permission to appeal the Alberta Utilities Commission’s (AUC) decision establishing the third-generation performance-based regulation (PBR3) plan for 2024–2028. FortisAlberta, ENMAX, and ATCO argued that the AUC’s PBR3 framework denied them a reasonable opportunity to recover prudent capital costs. The Court of Appeal found the utilities raised serious questions of law regarding the compatibility of cost recovery obligations with a PBR model that deliberately de-links rates from costs under section 122 of the Electric Utilities Act. FortisAlberta also raised a distinct issue regarding the Commission’s failure to account for its unique circumstances in applying a stretch factor. Given the importance of these questions to Alberta’s utility regulation framework, the Court of Appeal concluded they were of significant public and industry-wide importance. Despite important differences between the Alberta’s Electric Utilities Act and the Ontario Energy Board Act, this is still a case to watch

Other

The Town of Essex announced that it has decided to sell its shares in E.L.K. Energy, along with a subsidiary, to the ENWIN Group of Companies (which includes ENWIN Utilities Ltd.), owned by the City of Windsor.

Firm News

Both Jay and Mark were recognized in the latest edition of Canadian Legal Lexpert Directory.

Mark will be co-chairing the Ontario Bar Association’s Natural Resources and Energy Law Section’s Recent Developments in Energy Regulation program on April 24th.

What We Are Reading

Power Advisory’s Impact of Tariffs on Electricity Exports from Canada to the United States analysis, Positive Energy’s Energy Projects and Net Zero by 2050: Can We Build Enough Fast Enough Report, the Duke University’ Nicholas Institute for Energy, Environment & Sustainability’s Rethinking Load Growth Assessing the Potential for Integration of Large Flexible Loads in US Power Systems whitepaper, and Professor Schaufele’s article Demand and Oversight in Ontario’s Hybrid Electricity Market.

As always, if you have any questions, or think we can be of assistance to you or your organization, please do not hesitate to reach out to Mark Rubenstein at mark@shepherdrubenstein.com.

Uncategorized

Energy Regulatory Update (Q4, 2023)

Post author By admin
Post date January 15, 2024
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Welcome to the latest edition of the Shepherd Rubenstein Energy Regulatory Update, a quarterly round-up of the important developments in the Ontario energy sector. Below are some of the key regulatory happenings between October and December.

If you have not already, check out our special 2023 Year in Review edition which explores some of the most important themes and regulatory developments in the Ontario energy sector in 2023.

Ontario Energy Board

The OEB released several notable decisions over the past few months, including:

The Phase 1 decision of Enbridge Gas’ 2024-2028 rates application. As part of that decision, the OEB found that the energy transition poses a risk that assets used to serve Enbridge’s customers will become stranded, and the company has not provided an adequate assessment of that risk to demonstrate its plan is prudent As a result, the OEB, among other things, i) reduced the proposed 2024 capital budget by $250M, ii) increased the company’s equity thickness to 38% (less than the requested 42%) and, iii) ordered (with one commissioner dissenting), that beginning in 2025, all new small volume connecting customers will bear their connection costs upfront (as opposed to spread over 40 years as of now). Unhappy with the split decision regarding setting the customer connection revenue horizon to zero, the Minister of Energy announced the day after the decision was released that the Government would use its authorities to pause it, and introduce legislation, to reverse it. The OEB also addressed a number of other issues, including related to amalgamation and harmonization (i.e. integration capital, depreciation and overhead capitalization methodology, recovery of certain deferral and variances accounts).
Denying EPCOR South Bruce’s motion to review and vary, an earlier decision that while approving the request to establish a variance account to capture differences in assumed versus actual average customer consumption, only allowed recovery of 50% of the annual balance from customers until earnings reach 300 basis points below its approved ROE.
Denying Ontario Power Generation’s motion to review and vary, an earlier decision that rejected the request to establish a variance account to record the impacts of the overturning of Bill 124 on its nuclear revenue requirement.
Rejecting Entegrus Powerlines’ application for a Service Area Amendment (SAA) to its St. Thomas Energy Rate Zone to include a property (and the customer) currently part of Hydro One Network’s service territory because of a 1997 agreement.
Approval of a generic sector-wide variance account to track incremental locate costs arising from the implementation of Bill 93 (Getting Ontario Connected Act, 2022).
Denying a motion to review brought by Environmental Defence, challenging certain aspects of decisions made as part of two Enbridge Gas community expansion leave to construct proceedings.

The Minister of Energy issued a new Letter of Direction to the Chair of the OEB. The Minister highlighted a lengthy list of near-term initiatives that he expects the OEB to advance, including among others:

Powering Ontario Growth: Working with Ministry of Energy on initiatives to support the Powering Ontario Growth
Housing, Transportation, Job Creation: In the context of the Government’s goals for new homes, transportation, and job creation, review and report back by June 2024 on: i) electricity infrastructure unit costs in the electricity sector and potential models for cost recovery that could help to ensure infrastructure costs are kept low and are not a barrier to growth, ii) electricity distribution system expansion connection horizon and revenue horizon to ensure that the balance of growth and ratepayer costs remain appropriate.
Facilitating Innovation within Ontario’s Regulatory Framework: Report back by September 2024, through its existing work on the Benefit-Cost Analysis Framework for Addressing Electricity System Needs, or another report by September 2024 on what changes may be required to utility remuneration to ensure timely investment is being made, to support the right outcome, to enable low-carbon investments while protecting customers interests to deliver on the government’s vision.
DER’s and Future Utility Business Models: Working with the Ministry of Energy and IESO to develop and assess local and market opportunities for DERs, including consideration of the future regulatory landscape for alternative utility business models.
Electricity and Natural Gas Conservation: Consult with IESO and Enbridge and report back by April 2024 in how gas and electricity low-income and residential programs could be delivered through a single window.
Intervenor Process: Continue to review current intervenor processes and identify opportunities to improve efficiency and reduce regulatory burden. The Minister asked the OEB to report back by September 2024 with a plan to implement reforms, including but not limited to, consideration around a designated consumer advocate and capping costs.
The Minister of Energy also highlighted initiatives regarding Electric Vehicles, Performance Measurement Framework Review, Red Tape Reduction, Distribution Sector Resiliency, Responsiveness, and Cost Efficiency, and the Electrification and Energy Transition Panel.

The OEB released its updated RPP Price Report for the Regulated Price Plan and set RPP prices as of November 1^st. It also issued its cost of capital parameters for 2024 rate applications. As part of the accompanying letter, the OEB noted that it plans to hold a generic hearing to review the deemed capital structure and ROE formula early in the 2024-2025 fiscal year.

An industry guidance letter was issued regarding its intended approach to capital funding requests related to DER integration between rebasing applications from distributors on Custom IR.

The OEB released two reports to the Minister of Energy regarding defining Ontario’s typical residential electricity consumer, and improving distribution sector resilience, responsiveness, and cost efficiency (and the Minister’s response to the latter report was then included in his 2023 Letter of Direction).

The DER Connections Review work on system readiness for EV charger connection resulted in the OEB issuing a Notice of Proposal to Amend the Distribution System Code (DSC) to facilitate connection of EV charging infrastructure. The Notice creates Electric Vehicle Charging Connection Procedures, which standardize many elements of the connection requirements and process.

Significant work was undertaken as part of the consultation to develop a Benefit-Cost Analysis (BCA) Framework. The OEB held a stakeholder meeting, provided a draft project plan, and issued the draft BCA Framework Handbook for comment.

As a follow-up to a survey it completed earlier this year amongst distributors, the OEB released a report it had conducted by KPMG on the issues of regulatory treatment of cloud computing costs, and established a generic deferral account effective December 1^st, for distributors to record incremental cloud computing implementation costs.

The OEB updated its performance standard for natural gas facilities applications (i.e. certificate of public convenience and necessity, municipal franchise, well drilling and storage).

As part of its Low-Income Energy Assistance Program Emergency Financial Assistance (LEAP EFA) Program Review, OEB Staff issued its Report for comment.

The OEB announced the membership of the second term of the Adjudicative Modernization Committee (AMC) (Note: Mark Rubenstein was once again selected a member).

Both the CEO and Chief Commissioner issued their respective mid-year 2023-2024 updates.

There was considerable compliance activity during the final quarter of 2023. Assurances of Voluntary Compliance (AVC) were accepted from Wellington North Power for a delay in implementing Green Button, and Newmarket-Tay Power distribution for its failure to comply with a number of customer disconnection obligations under the Distribution System Code. AVCs were accepted from three more electricity distributors (Niagara Peninsula Energy, Milton Hydro, and E.L.K. Energy) related to billing errors that resulted in the overcharging of customers through the fixed monthly service charge. The OEB also accepted AVCs from a cement production facility conducting business as an electricity wholesaler without a license, and a unit sub-metering company (Priority) who had not correctly delivered the Ontario Electricity Rebate to its customers. The OEB Mid-Year Compliance Report was also issued.

The OEB shared version 1.1. of the Ontario Cyber Security Framework (OCSF) used by electricity transmission and distributors to report on cyber security readiness.

As it committed in its response to the Auditor of General of Ontario’s 2022 audit, the OEB commenced a review of its existing customer protection framework for Unit Sub-Meter Providers (USMPs).

The OEB and the IESO also issued their Innovation Sandbox/Grid Innovation Fund Joint Target Call Interim Report.

The Market Surveillance Panel issued its State of the Market Report 2022.

Independent Electricity System Operator

On the electricity procurement front, the IESO’s Long-Term 1 RFP (LT1 RFP) process is currently underway, which is expected to procure 2,500 MW of dispatchable new build resources. The submission deadline was in mid-December, and contracts are expected to be offered to successful proponents in Q1/Q2 2024.

As part of the LT1 RFP procurement, project proponents must get consent from the host municipal council. In the leadup to the submission deadline, a number of project proponents were facing opposition in various municipalities (primarily on environmental grounds). Recognizing the issue, the Minister asked the IESO to ensure it made itself available to municipal councils to answer questions on Ontario’s electricity system needs. Ultimately, municipal councils in Thorold, Halton Hills and Kingston refused to give the necessary consents for any new natural gas facilities (or expansion of existing facilities), while they were allowed in Napanee, and earlier in Windsor.

The IESO completed its annual Capacity Auction procuring a record 1,867MW of capacity for summer 2024 and 1,310 MW for winter 2024/2025. As previously directed by the Minister of Energy, the IESO also launched the Small Hydro Program, which is to provide new contracts for existing hydroelectric facilities with installed capacities of 10MW and below.

In December, in response to a request earlier that month from the Minister of Energy, the IESO issued a Resource Adequacy Update, focused on Ontario’s system needs beginning in 2029. The Resource Adequacy Update includes a 5000 MW procurement target for energy needs to be met through 3 bi-annual long-term RFPs. The first of these, Long-Term 2 RFP is expected to take place in 2025. The IESO has begun engagement for it, and is anticipated to target 2,000 MW of new energy producing resources.

The IESO provided its comments on the Federal Government’s proposed Clean Electricity Regulations (CER). In its view the CER as drafted are unachievable in Ontario by 2035 without risking the reliability of the electricity system, electrification of the broader economy and economic growth. The Minister of Energy tasked the IESO to provide a more detailed assessment on the CER’s impacts on Ontario by the end of February.

The Minister of Energy issued a procurement directive to increase annual IESO funding to indigenous energy support programs.

The January 2024-June 2025 Reliability Outlook was released.

The Minister of Energy approved an amendment to the IESO’s 2023-2025 Business Plan, which includes increases in funding for 2024 and 2025 to carry out initiatives in support of the Powering Ontario’s Growth plan. The IESO has indicated that it will file an application to the OEB for approval for the necessary revenue requirement and fee increases pursuant to its previously approved fees settlement proposal.

The IESO, which was directed to administer the Hydrogen Innovation Fund (HIF), announced 10 projects that had been awarded funding.

As of December 1, 2023, IESO made available for purchase a portion of its available clean energy credits.

The Market Assessment and Compliance Division (MACD) completed two investigations of TransCanada Energy, and found it breached of a number of market rules, levying penalties of $3.72M.

Legislative and Regulatory

The Government of Ontario issued an Order-in-Council declaring three new transmission projects (a new 230 kV transmission line from the Mississagi TS to the Third Line TS, a new 500 kV transmission line from the Mississagi TS to Hanmer TS, and a new 230 kV transmission line from the Dobbin TS to either the Cherrywood TS or Clarington TS) as priority projects under section 96.1 of the Ontario Energy Board Act. The Minister of Energy issued a directive to the OEB requiring it to amend Hydro One’s transmission license to require the company to develop and seek all necessary approvals for the three projects.

The Government of Ontario issued a number of new regulations, amendments to existing regulations, and regulatory proposals, including:

Amending Ontario Regulation 160/19 under the Ontario Energy Board Act, 161/99 under the Electricity Act, and 389/10 under the Electricity Consumer Protection Act, implementing recent amendments to the Ontario Energy Board Act that permit the OEB to exempt certain licensing requirements with respect to specified activities for the purposes of participating in a pilot or demonstration project.
Issuing Ontario Regulation 373/23 under the Ontario Energy Board Act, that requires the OEB to exclude from rates awards, damages, or penalties required to be paid under the Building Transit Faster Act, or amounts required under section 59 of that Act.
Amending Ontario Regulation 39/23 under the Electricity Act, specifying how the IESO and Ontario Power Generation should account for proceeds from transfer of its clean energy credits.
Amending Ontario Regulation 506/18 under the Electricity Act, to streamline the exemption process for energy consumption and water use reporting.
Amending Ontario Regulations 679/21 under the Ontario Energy Board Act, and 389/10 under the Energy Consumer Protection Act, to clarify regulatory requirements for community net-metering and third-party net-metering ownership.
Amending Ontario Regulation 14/18 under the Ontario Energy Board Act, increasing the income threshold for the Ontario Electricity Support Program.
Amending Ontario Regulation 363/16 under the Ontario Rebate for Electricity Consumers Act, increasing the Ontario Electricity Rebate (OER) amount from 11.7% to 19.3%.
Proposal to amend Ontario Regulations 429/09 under the Electricity Act to allow Class A customers under the Industrial Conservation Initiative (ICI) to enter into power purchase agreements (PPAs) with renewable generation facilities to allow them to offset their peak demand.
Proposal to amend Ontario Regulation 160/99 under the Electricity Act to expand the exemption for legacy clean energy credits until they expire in 2027.

The Ministry of Energy launched a consultation on the future of the Natural Gas Expansion Program, issuing a discussion paper, and sought comments. The Ministry of Energy is consulting on potential changes to the Ontario Energy Board Act that would allow it to prescribe certain conditions by regulation to exempt the leave to construct requirements for energy projects. One of those regulations would be exempting projects that cost between $2-$10M from the requirements for leave to construct, subject to an OEB determination that the Crown has satisfied its duty to consult.

The Government of Ontario also introduced Bill 153, Building Infrastructure Safely Act, 2023, which amends the Ontario Underground Notification Systems Act (i.e. the One Call Act), that makes a number of changes, including prohibiting underground infrastructure owners and operators (such as utilities) from charging for locates, and to allow the Minister to make improvements to locates delivery through regulation.

Federal Government

As part of its Fall Economic Statement (FES), the Federal Government announced that the Canada Growth Fund will be allocated $7Bn, on a priority basis, for carbon Contract for Differences (CfD) and offtake agreements. In late December, the Canada Growth Fund announced its first carbon credit offtake agreement.

The FES also provided further information on the delivery timeline for various investment tax credits. Accompanying legislation was introduced implementing the CCUS and Clean Technology Investment Tax Credits.

The Canadian Electricity Advisory Council issued an Interim Report, and launched a consultation. NRCan released a summary of what it heard from its Request for Information regarding regulatory, policy and market barriers and opportunities for accelerating the pace of electrification and electricity grid modernization.

Judicial Decision

The Alberta Court of Appeal in Alta Link Management Ltd v. Alberta Utilities Commission overturned a decision of the Alberta Utilities Commission (AUC), finding that the AUC breached its duty of procedural fairness when it did not provide adequate notice to electricity utilities that it was considering the issue of whether to allow a fair return that should be earned on customer contributions (from distributors paid to transmitters). The AUC had determined that neither distributor nor transmitters should be permitted to earn a return on those capital contributions, which was a change from the previous policy.

What We Are Reading

The Ontario Energy Association’s Distribution System Operator (DSO) Study. Analysis and commentary on the Minister of Energy’s announcement to overturn the OEB’s decision on Enbridge’s customer connection policy (Power Advisory, Gowlings (Ian Mondrow) and the Ivey Energy Policy and Management Centre). British Columbia Utilities Commission’s Final Report on its Inquiry into the Regulation of Hydrogen Energy Services.

As always, if you have any questions, or think we can be of assistance to you or your organization, please do not hesitate to reach out to Mark Rubenstein at mark@shepherdrubenstein.com.

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