PowerFair May 16, 2005 Westin Harbour Castle, Toronto

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PowerFairMay 16, 2005 Westin Harbour Castle,
Toronto

• Winners and Losers The New Ontario Hybrid Market

Robert Mace, EDA Chair
Electricity Distributors Association
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Ontarios New Hybrid Market

• Recommendation made by Electricity Conservation
  and Supply Task Force, January 2004 An
  electricity supply market structure based on a
  hybrid model which is a combination of
  market-based, regulated and contract-based supply
  with consumer prices established accordingly.
• This premise has been embraced by Ontarios
  government and comes very close to what Bill 100
  has set out to accomplish

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Ontarios New Hybrid Market

• The goal is to bring stability to Ontarios
  electricity market and address the serious
  supply issues we are facing
• Hybrid market is still evolving
• Bill 100 legislation has set stage for enabling
  this hybrid market, but it will take some time to
  fully realize we are still in transition and
  uncertainty remains on many fronts

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Recommendations of EDAs Beyond 210 Policy
Paper

• June 2003, EDA Beyond 210 position paper
  released. 5 fundamental principles
• Generation of electricity in Ontario should be
  subject to healthy competition
• Electricity prices must reflect the true cost of
  power
• Monopoly delivery businesses of transmission
  distribution should continue to be regulated by
  OEB
• Customers of all sizes should have option of
  choosing their electricity supplier and,
• Small customers should not be subject to a spot
  price as a default.

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Recommendations of EDAs Beyond 210 Policy
Paper

• EDAs proposed market design contemplated an
  aggregator that would facilitate a contract-based
  approach to default supply
• From an environmental perspective, the
  assignment of the default supply procurement
  responsibility to an aggregator would facilitate
  the development of renewable energy portfolio
  standards. Also,the transition to price that
  reflect the true cost of electricity facilitates
  sustainable, commercially driven Demand-side
  Management.

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Winners in the Hybrid Market

• Create an economically viable energy sector and
  investment will follow, as will the building of
  new sources of energy
• This will further stimulate investment in
  infrastructure and bring more competition to
  generation
• This will in turn, ensure reliable, safe and
  cost-efficient services for Ontarios electricity
  customers

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Winners in the Hybrid Market

• Short-term winners Renewable energy companies
  that have been successful in securing a green
  contract from government
• 2 distribution affiliate companies, Guelph Hydro
  Generation and Energy Ottawa, were awarded
  contracts for the building of generation plants
  that will convert landfill methane gas into power.

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A Standard Rate Plan

• Ontarios local distribution companies are
  advocates of predictable, sustainable prices for
  electricity consumers. The governments plan to
  introduce a stable, blended price for electricity
  that reflects its true cost, achieves both these
  goals.
• Consumers and distribution companies have been
  harmed by previous price instability
  predictable prices for consumers, and a
  marketplace for electricity based on long-term
  contracts, are essential to ensure a stable
  electricity sector in Ontario.

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Regulated Price Plan (RPP)

• OEBs RPP is intended to address a number of key
  issues
• Introduce pricing for consumers that reflects
  prices closer to the actual cost of electricity
• Provide some stability and predictability in
  pricing which will be reviewed and/or adjusted on
  a yearly or more frequent basis and,
• Provide a platform that supports electricity
  conservation.

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Working in Tandem with the New Hybrid Market

• Many threads extend out from the hybrid market
  that must work in tandem in order for this model
  to be successful
• One of the threads energy conservation is a key
  component of Ontarios sustainable energy future
  LDCs have a key role to play in this capacity

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Working in Tandem with the New Hybrid Market

• Conservation and Demand management programs are
  being put in place by distributors to support
  government policy on creating a conservation
  culture in the province relates directly back
  to supply issue
• Regulators and government have recognized that
  electricity distributors must be kept whole
  through this process in order for DSM activities
  to be truly successful - a Loss Revenue
  Adjustment Mechanism will help achieve this

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Hybrid Market is Still Evolving

• There is still a great deal of uncertainty that
  exists in Ontarios electricity market a hybrid
  market is emerging, but has not been realized
• Relative newness of OPA and the Conservation
  Bureau they remain untested, and have yet to
  fully engage in this new market
• Uncertainty surrounds the governments decision
  on the implementation of the smart metering
  initiative
• There is regulatory uncertainty on a number of
  fronts

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Hybrid Market is Still Evolving

• Although we are moving in the right direction, it
  is still too early to predict whether the
  envisioned hybrid market will be successful in
  rectifying the many serious challenges that it is
  intended to address
• Getting it right is going to take determination
  and focus, and most importantly, a continuing
  dialogue among key energy stakeholders, the
  government, market overseers, and the regulator.