June 21, 2004

Targets for conservation, renewable energy included electricity restructuring legislation

Legislation introduced last week by Energy Minister Dwight Duncan would reorganize Ontario's electricity sector to address the growing gap between supply and demand, enhance energy conservation and ensure price stability for consumers across Ontario. Bill 100, the Electricity Restructuring Act, 2004 would establish a new Conservation Bureau, headed by the province's first Chief Energy Conservation Officer, and would require the Ministry of Energy to set targets for conservation, renewable energy, and the overall supply mix of electricity in the province.

"It is absolutely critical that we move forward quickly to boost new supply, increase conservation and maintain price stability for consumers so that we can ensure continued prosperity in the province," Duncan said.

Ontario needs to refurbish, rebuild, replace or conserve 25,000 megawatts of generating capacity by the year 2020 to meet growing demand while replacing its coal-fired generating plants. That represents 80% of Ontario's current generating capacity and would require an investment of $25 to $40 billion.

The proposed legislation would:

*establish the Ontario Power Authority (OPA) to be responsible for ensuring an adequate, long-term supply of electricity, a mandate that no existing institution in the sector carries;

*redefine the role played by the Independent Electricity Market Operator (IMO), as defined in its new name - the Independent Electricity System Operator. Some of the IMO's current responsibilities would be transferred to the Ontario Energy Board and the proposed Ontario Power Authority;

*provide incentives for more private sector investment in new generation to help meet growing demand; and

*adjust regulated prices in parts of the electricity sector, subject to approval by the Ontario Energy Board, to ensure price stability for consumers.

The new Ontario Power Authority (OPA) would be a self-financing agency, with fees approved by the Ontario Energy Board. It would be responsible for assessing the adequacy and reliability of electricity resources and for forecasting future demand and the potential for conservation and renewable energy. It would prepare an integrated system plan for generation, transmission and conservation, and would procure new supply, transmission and demand management either by competition or by contract, when necessary.

The OPA would establish the Conservation Bureau, headed by a Chief Energy Conservation Officer, to provide leadership in planning and co-ordination of electricity conservation and demand management.

The government would set targets for conservation and renewable energy and set guidelines for diversity of supply. Medium-term goals have already been set: the province aims to obtain 5% of its capacity from new renewable sources by 2007, and 10% 2010. It further aims to reduce electricity demand by 5% by 2007 through conservation. The Ontario Power Authority would be charged with achieving the targets set by the government.

The proposed legislation, as well as a number of technical regulations identified in the bill, will be subject to extensive consultation and input over the summer months. Subject to passage of the act, implementation of the new structure is targeted for early 2005.

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