OEB Letter of Direction & Climate Change

December 14, 2023

On November 29, 2023 the Ministry of Energy released the Minister’s Letter of Direction to the Ontario Energy Board (OEB).  If nothing else, this letter should allay any concerns about this Ministry not taking climate change and the resulting impacts seriously.

The Letter of Direction is a detailed annual to-do list sent by the Minister to the Chair of the OEB.  It is made public.  It makes clear what the priorities of the Minister are and what can be expected from the OEB in terms of activity over the next twelve months.  My concern is that it also makes clear that the OEB is viewed as an extension of the Ministry and that we should not expect much in the way of independence.  The Commissioners who adjudicate actual cases are independent but they must do so within the framework provided by the OEB regulations and government direction.  I have often felt that energy consumers, whom the OEB is there to protect, could also use a little more protection from the Government like that provided by an Ombudsman, the Ontario Financial Accountability Office or the Auditor General but that is not the case here.

Most, though not all, of the directions in the letter pertain to matters related to Climate Change.  These include, in no particular order:

Low-Carbon Generation

In July 2023, the Government issued Powering Ontario’s Growth, their roadmap to meeting the electricity generation demands of electrification and de-carbonization.  My blog on this publication can be found here:  https://www.notlhydro.com/powering-ontarios-growth/.  The Minister is telling the OEB to review what they need to do to support this effort and ensure it is done in a cost-effective manner as relates to the distribution and transmission utilities.  This report is due in September.  As this is basically the job of the OEB this should be fairly straight forward.


The Government wants to renew conservation efforts for both electricity and natural gas.  This makes sense.  I was critical of previous conservation efforts as they were done at a time of excess generation.  This is no longer the case.  The previous conservation was also poorly structured.  My blog last year on this can be found here:  https://www.notlhydro.com/conservation/.  The Minister is requiring a report from the OEB by April on how to efficiently deliver residential programs.   Separately, the Minister has asked for guidance on how the IESO and local distribution companies (LDCs) can effectively deliver other conservation programs and how these programs should be paid for.  With regards to the latter, conservation is currently paid for using the Global Adjustment which is part of the cost of the electricity commodity.  I disagree with this.  I think the cost of the commodity should be just the cost of generation and the conservation should be a separate rate included in regulatory.  Having said this, I recognize most consumers just care what the total cost is and that is not changed by where a cost is included.

Electric Vehicles

Two directions were given with regards to electric vehicles (EVs).  The first was to facilitate the installation of electric chargers by ensuring LDCs were connecting electric charging stations in appropriate time and at a fair cost and to ensure the delivery charges to charging stations were fair given their demand profile.  The Government has a program https://www.ontario.ca/page/ev-chargeon-program  to subsidize the installation of public EV chargers so wants no impediments.  The second was to ensure LDCs are ready should the demand for electric vehicles, and the subsequent increase in the demand for electricity, take-off.  Like the rest of us, the Government does not know what the future demand for electric vehicles will be but understandably wants LDCs to be prepared should EV sales take off.  NOTL Hydro submitted an article to local papers about what it is doing in this regard back in January https://www.notllocal.com/local-news/notl-hydro-preparing-for-transition-to-electric-vehicles-6379059.


Resiliency is about preparing the electricity grid to handle the more frequent extreme weather events we are seeing and expect to continue to see due to climate change.  This differs from reliability which is about keeping the power flowing on a day-to-day basis.  The OEB submitted a report to the Ministry back in June 2023 which was just made public. Not recommended reading unless you are a real policy and energy nerd. https://engagewithus.oeb.ca/sectorresilience?utm_medium=email&utm_source=whatsnew.  Basically, the OEB and the Government want LDCs to build resiliency into their systems without spending like crazy and driving up rates.  As long as it is recognized that the extreme weather issues vary across the province and that LDCs will need to prepare based on their local conditions then this is appropriate.

Like most LDCs, NOTL Hydro is taking steps to improve the resiliency of its operations.  This includes moving some of the infrastructure underground, replacing old poles with larger, sturdier poles and installing smart grid technology to allow faster responses to outages.  These are consistent with the steps we have been taking for many years to improve reliability and, when done in a measured way, can be implemented in a manner that does not drive up rates.

Electrification and Energy Transition Panel

This panel was created in late 2022 and is to provide their report with recommendations on what the Province should do by the end of this year.  No idea when the report will be made public.  The letter of direction is telling the OEB to be ready for further direction based on government actions resulting from this report.  As is often the case, I suspect the panel report will provide the cover for the Government to take actions it may otherwise not want to take to meet its net-zero obligations.  I discussed the panel in a blog in August https://www.notlhydro.com/electrification-and-energy-transition-panel/.   David Collie, the Chair of the panel, made a presentation at an industry event recently and outlined four themes for the report:

  1. Transition – The transition from a carbon-based to a non-carbon economy will create economic challenges for some that will need to be supported.
  2. Double the Grid – The size of the grid will need to double which will create its own financial and regulatory challenges.
  3. Energy Efficiency – A big way to mitigate the costs of the transition will be to become more energy efficient at the same time.  Some of the current solutions like EVs and heat pumps are also more energy efficient.
  4. Carbon Sequestration – Part of the solution must be carbon capture to offset those areas where it is not possible or not economically viable to eliminate the use of carbon.  Carbon capture involves removing carbon and then storing it.  Currently, most carbon capture is done during gas processing so that it is captured before it is released.  There are other new technologies that can extract carbon from the atmosphere.  There are also old-fashioned approaches such as planting more trees.

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