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Challenges and Opportunities in Ontario’s Electricity Sector

Cross-Border Forum on Energy Issues

March 2, 2006 – Washington, D.C.

Rick Jennings

Assistant Deputy Minister (A), Office of Energy Supply

Ontario Ministry of Energy, Toronto

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Energy Jurisdiction in Canada

Provinces:

Main energy jurisdiction, including intra-provincial electricity market, generation, transmission and distribution.

Federal Government:

Inter-provincial and international energy matters, inc. transboundary transmission and generation.

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Areas of Federal/Provincial Cooperation

Canada/U.S. Bilateral Electricity Reliability Oversight Group:

- New ERO (2005 FERC NPR)- Joint NERC/Canada and NERC/Provinces

reliability MOU’s

East-West Canadian Transmission Grid

Regulatory Reform: Advance New Supply

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Canada’s Electricity Supply Balance

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Ontario’s Electricity Supply Balance

SASK•Wholesale open

access •Functional separation

AB•Mandatory Power Pool•Wholesale & retail open

access since 2001•Regulated retail rates until

July 2006•Functional separation with

ISO•Voluntary divesture (one

ITC) •Independent Market

Surveillance Administrator

MAN•Wholesale open

access•Functional separation•Coordinating member

of MISO RTO

ON•Industry unbundling in 1998

•Wholesale & retail open access since 2002

•Changes in resource planning, pricing & acquisition in 2005 including creation of Ontario

Power Authority (OPA)

QUE•Wholesale open access •Functional separation•Wholesale competition for domestic load >165 Twh 

NLEnergy policies

under review

NB•Wholesale & large

industrial open access•Bilateral market open

and creation of independent NB System

Operator in 2004

NS•Wholesale open access•Functional Separation

PEIDistribution

Networkonly

BC•Wholesale access with industrial open access

applied for and expected later in 2005

•Independent Xmssn entity

Status of Canadian Market Restructuring: June 2005

Source: Canadian Electricity Association

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Electricity Restructuring: New Institutional Structure

CompetitiveGenerators

LargeConsumers

SmallConsumers

Fixed-PriceGenerators(e.g., OPG

Nuclear and Baseload Hydro)

IndependentElectricity

System Operator

(IESO)

RegulatedPricePlan

Ministry of Energy• Overall policy/legislative framework• Sets targets for technology,

conservation, renewables.

Ontario Energy Board• Guarantees public input/fairness• Approves prices for price

regulated generators; oversees contracts for new supply

Ontario Power Authority• Prepares integrated system • Contracts for new supply and DSM• Manages regulated price plan• Conservation Bureau

EnergyRetailers

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Ontario Generation Mix (2005)

Nuclear: 36.8%

Hydro: 25.8%

Coal: 21.4%

Oil/Gas: 16.5%Misc.: 0.2%

www.ieso.ca/imoweb/pubs/media/10yearOutlook-highlights-2005jul.pdf

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Ontario Electricity Prices

0

20

40

60

80

100

120

140

5/1/

2002

7/1/

2002

9/1/

2002

11/1

/200

2

1/1/

2003

3/1/

2003

5/1/

2003

7/1/

2003

9/1/

2003

11/1

/200

3

1/1/

2004

3/1/

2004

5/1/

2004

7/1/

2004

9/1/

2004

11/1

/200

4

1/1/

2005

3/1/

2005

5/1/

2005

7/1/

2005

9/1/

2005

11/1

/200

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1/1/

2006

Market Open to Jan. 31, 2006 Simple Average HOEP

$56.46/MWh

Weekly Simple Average HOEP

2004 Simple Average HOEP$49.95/MWh

2006 YTD Simple Average HOEP

$54.35/MWh

2005 Simple Average HOEP$68.49/MWh

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Coal Replacement Scenario

http://www.ieso.ca/imoweb/pubs/media/10yearOutlook-highlights-2005jul.pdf

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New Energy Supply Initiatives

Renewables RFPs 1,600 MWClean Energy/DSM RFPs 1,955 MWOPA procurement 3,770 MWNiagara Tunnel ~200 MWThunder Bay conversion 310 MWNuclear refurbishment 2,055 MWManitoba CTI 400 MW

Total ~10,290 MW

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Potential Intertie Expansions

New York

Manitoba(+ up to 1500 MW)

Quebec (+1250 MW)

Michigan(+ 500 MW)

Minnesota

PJM (+ upto 975 MW)

Niagara(+ 800 MW)

Source: Hydro One

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Ontario’s Future Electricity Supply Mix

Ontario Power Authority Electricity Supply MixAdvice Report to government, Dec./05:

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Ontario’s Future Electricity Supply Mix (cont’d)

Public consultations in Ontario communities, etc., Feb./06 on.

OPA to finalize demand and transmission forecast, supply mix/CDM options, and transmission requirements by May/06.

OPA to prepare Integrated Power System Plan and submit to Ontario Energy Board by Aug./06.

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Ontario’s Future Challenges

Growth and supply gap.

Urgent need for conservation, new supply and transmission, particularly in Greater Toronto Area.

Needs of Northern and remote communities.

Public opposition to new infrastructure projects.

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Further Information/Questions:

Rick JenningsA/Assistant Deputy MinisterOffice of Energy SupplyOntario Ministry of Energy, Torontorick.jennings@energy.gov.on.ca

Ontario Power Authoritywww.powerauthority.on.ca

Independent Electricity System Operatorwww.ieso.ca

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