April 26, 2004

Ontario energy plan will promote renewable sources, stabilize prices, create a "culture of conservation"

A new plan for Ontario's electricity sector will increase conservation while providing new supplies and stable prices. Addressing the Empire Club on April 15, Energy Minister Dwight Duncan said Ontario faces an energy crisis. It needs to refurbish, rebuild, replace or conserve 25,000 MW of generating capacity by the year 2020 to meet growing demand while replacing polluting coal-fired generation. That represents 80% of Ontario's current generating capacity and would require an investment of $25 to $40 billion.

To tackle these challenges, the government intends to propose sweeping reforms in legislation to be introduced this June. If passed, the reforms would include:

- a new Ontario Power Authority that would ensure an adequate, long-term supply of electricity, including a new Conservation Secretariat, headed by a Chief Conservation Officer.

- a requirement that the Ministry of Energy set targets for conservation, the use of renewable energy, and the overall supply mix of electricity in the province of Ontario.

- greater encouragement of private sector investment in new generation to help meet growing demand.

- a combination of a regulated and a competitive electricity generation sector, which would see prices for electricity in Ontario set in two ways: part of the supply would be price-regulated by the Ontario Energy Board (OEB), and part would be paid the competitive market price. All consumers would benefit from the increased stability that this blended supply mix would provide.

- a new standard rate plan offered to homeowners and small businesses, with prices that would be adjusted and approved periodically by the OEB. This would ensure price stability while passing on the true cost of the electricity.

- choice for industrial and commercial consumers, who would continue to have the flexibility offered by the market, or could use other tools to help them manage their energy costs.

Duncan also announced that the Honourable Jake Epp has been confirmed as chairman of Ontario Power Generation (OPG) effective immediately, and that the government is beginning a search for nine new members of OPG's Board of Directors, as well as a new Chief Executive Officer.

The new Ontario Power Authority would be responsible for ensuring an adequate long-term power supply in Ontario. This entity would also carry out forecasting and planning functions and would be authorized to call on the private sector when needed to build new generation capacity through a competitive and transparent procurement process.

The provincial government believes this would foster innovation and creative approaches to meeting Ontario's supply challenges. It has already anticipated the need for this function by announcing a request for proposals (RFP) for 2,500 megawatts of new generation capacity or demand management initiatives, as well as another RFP for approximately 300 megawatts of renewable capacity.

Within the new Authority, a new Conservation Secretariat would be established to lead Ontario's conservation efforts and develop province-wide programs to help Ontario's homes and businesses to conserve and to save money. The Conservation Secretariat would also be charged with monitoring the progress Ontario is making in reducing overall demand.

The government believes its plan would encourage a diverse spread of generation capacity across the province, and reduce barriers to distributed generation, which, in turn, would lower the risk of transmission failure and minimize the environmental footprint of Ontario's electricity infrastructure. Distributed generation, which is also attractive from a security perspective, holds significant promise for the environment, focusing resources only where they are absolutely necessary, and reducing the need for massive transmission networks across the province.

The Ministry of Energy will continue to set targets for conservation, the use of renewable energy, and the overall supply mix of electricity in the province. The proposed legislation will give explicit directive power to the Ministry of Energy to establish targets for conservation, the use of renewable energy, and the overall supply mix of electricity in the province of Ontario.

The creation of a Conservation Secretariat led by a Chief Conservation Officer is part of a comprehensive plan to create a "culture of conservation" in Ontario. Other components of the plan include:

- setting targets of reducing Ontario's energy consumption by 5% by 2007 through conservation and obtaining 5% of Ontario's capacity from new renewable sources by 2007, 10% by 2010.

- launching a public education and outreach campaign, including town hall meetings, to encourage conservation

- setting aggressive targets to put smart meters into every home by 2010, with an interim target of 800,000 meters in place by 2007. Together with more flexible pricing, this would allow Ontarians to save money if they run appliances in off-peak hours.

- developing regulations to provide province-wide access to net metering, which enables businesses and homeowners generating renewable electricity to receive credit for the excess energy they produce.

- allowing local distribution companies to begin investing approximately $225 million for local, community-based conservation programs.

- creating incentives for local distribution companies and Hydro One to reduce expensive, wasteful "system loss" that can occur when transmitting electricity to consumers.

"By making smart choices that conserve energy, we can all contribute to an Ontario with more jobs in an innovative economy, stronger communities and a healthier environment with cleaner air to breathe," said Premier Dalton McGuinty. "The more we reduce our demand for electricity, the less we'll need to spend increasing supply by building new sources of power." In order to lead by example and help pioneer energy-saving ideas, Premier McGuinty has asked the provincial government to reduce its own electricity consumption by 10% by 2007.

In separate, related initiatives, the provincial government is inviting proposals for wind power development on Crown land and has released for comment a draft New Site Release and Development Review policy. The proposed policy sets out a framework for managing Ontario's waterpower resources and providing new opportunities for waterpower development through the release of provincial Crown land, while ensuring sustainable development of such land. The policy outlines a process for releasing Crown greenfield opportunities and the approval process for developments on both private and Crown lands, and addresses tenure matters and rental rates and taxes.

The Ministry of Natural Resources (MNR, under whose authority greenfield opportunities on Crown land may be made available) will be holding a series of open houses to discuss the policy proposal between April 26 and May 14. Details concerning locations are included in the draft policy, which has been posted on the Environmental Bill of Rights registry for a 60-day comment period running to June 1, 2004 (www.ene.gov.on.ca, registry reference No PB04E6017).

At the same time, MNR is proceeding with a plan to test, monitor and, where viable, develop wind energy projects on Crown land. The proposal, which was posted for a 45-day comment period in April 2003, has been modified to take into account issues raised during the comment period. The final decision may also be viewed on the EBR registry, reference No PB03E6004.

An estimated 3,000 megawatts of wind power capacity could be developed on private and Crown land. Most viable wind farms on Crown land would likely be located along the north shore of Lake Superior and offshore in the Great Lakes. The first turbines on Crown land could be built by 2005. Cities near which wind turbines could be located include Thunder Bay, Sault Ste Marie, Windsor, Sarnia, Chatham-Kent, Hamilton and Belleville.

"The wind industry is happy to see the announcement of the Ontario Crown Land policy for wind developments," commented Robert Hornung, president of the Canadian Wind Energy Association. "Ontario's winds are an enormous untapped electricity source that can make an important contribution to Ontario's electricity supply. Today's announcement is an important step forward in moving Ontario toward a clean electricity future."

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