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What lessons should Ontario draw from the gas-plant cancellation scandal? – Published in the Ottawa Citizen May 13, 2013

The unfolding saga of the McGuinty government’s decision to cancel, at an apparent cost approaching $600 million, two natural gas-fired power plants in Mississauga and Oakville is opening a series of questions about the province’s approach to planning and managing its electricity system. The government of McGuinty’s successor, Kathleen Wynne says that it wants to make sure something like the gas-plant fiasco doesn’t happen again. At the same time it seems lost in terms of what to actually do, beyond requiring the Ontario Power Authority (OPA) to engage in more effective public consultation before siting decisions about power generation facilities are made.

The gas plant situation reflects much deeper problems than arguably poor facility siting decisions. Rather, the situation represents the culmination of an increasingly explicit politicization of decision-making about the province’s electricity system over the past decade.

Ironically, when Mr.McGuinty arrived in office in 2003 his new government immediately set about trying to reintroduce some measure of structure and planning into Ontario’s electricity system in aftermath of the Harris government’s failed attempt to pursue a purely market-based model. The Ontario Power Authority was established in 2004 specifically to develop a long-term Integrated Power System Plan for the province, which was to be subject to a limited review and then approval by the Ontario Energy Board.

The OPA would ultimately develop two such plans. However, only one ever even reached the Energy Board for review, and that review was curtailed almost as soon as it began. The OPA’s abortive plans, of which the Oakville and Mississauga plants were part, were overtaken by a host of new developments: major declines in the province’s electricity needs; the government’s commitment to the rapid deployment of renewable energy through the Green Energy and Green Economy Act; and the recognition of massive underestimations of the costs and timeframes for building and refurbishing nuclear power plants.

The response to this situation left on the table by Mr. McGuinty’s government was to give up on the pretense of rational planning altogether. Bill 75, which died on the order paper when Mr.McGuinty prorogued the Legislature last October, would have effectively eliminated the OPA’s mandate to come up with a long-term plan for the electricity system and the OEB’s role in reviewing and approving that plan. Rather the system was to be governed though energy plans issued by the cabinet, with little or no meaningful external review at all. Ms. Wynne’s government seems poised to continue down the same path with respect to the future direction and management of the province’s electricity system.

To do so would be a serious mistake. The province is already being exposed to financial risks that have the potential to far outstrip the costs of the gas plant cancellations. Over the past few months Ontario Power Generation, the provincially owned successor to Ontario Hydro, has signed contracts worth nearly $1 billion on preliminary stages of the refurbishment of the Darlington nuclear facility. Estimates of the costs of the actual refurbishment run from $8.5 to $35 billion. Yet there has been no meaningful external review of the project despite serious questions about its rationale, particularly in the face of declining electricity demand and the availability of alternative energy sources.

Ontario faces a high degree of uncertainty about its future energy needs. The restructuring of the province’s economy in the direction of service and knowledge-based sectors and away from traditional manufacturing and resource extraction activities means that future demand is going to be far less predictable than in the past. At the same time, major technological advances are occurring with respect to energy conservation, electricity grid management, energy storage, and renewable energy technologies. The appropriate response to this situation is not to abandon efforts at planning in favour of short-term political management. What is needed is a fundamentally different approach to planning, one that is more flexible and adaptive, and works on much shorter timeframes. Among other things this will require reconsidering the centrality of the role of nuclear energy in the system. The scale and multi-decade planning, construction and operational timeframes of that technology leave it especially poorly suited to the type of dynamic planning framework that Ontario now needs.

Instead of attempting to continue to manage the system via technologically prescriptive fiats and politically motivated micro-management, Premier Wynne’s government needs to inject reason and accountability into the energy system planning process. For a start, this means clearly articulating long-term goals for the province’s electricity system that advance energy sustainability, including a California-style rule that conservation options be pursued before new power plants. Provision then needs to be made for the rigourous, independent public review of the plans developed on the basis on these goals, before they are finalized and moved towards implementation. Without such a framework the finances, energy security and environment of Ontario residents and electricity ratepayers will continue to be at risk.