Canada: Advisory Council On Government Assets – Initial Recommendations For Hydro One And Ontario Power Generation, And Updates On The Merger Of The Independent Electricity System Operator And The Ontario Power Authority

Last Updated: October 29 2014
Article by Linda Bertoldi, Mark J. Rodger and Shane Freitag

Most Read Contributor in Canada, November 2016

On Friday, October 17, 2014, Ed Clark, Chair of the Ontario Government's Advisory Council on Government Assets ("Council"), gave remarks at the C.D. Howe Institute on the Council's initial recommendations for restructuring government-owned assets, including the Liquor Control Board of Ontario ("LCBO"), Hydro One and Ontario Power Generation ("OPG").

The first part of this bulletin describes the mandate of the Council, summarizes the recommendations for both OPG and Hydro One, and outlines the Premier's reaction to the initial recommendations of the Council. The second part of this bulletin provides a brief update on the merger of the Independent Electricity System Operator ("IESO") and the Ontario Power Authority ("OPA") which is scheduled to take effect on January 1, 2015.

THE COUNCIL ON GOVERNMENT ASSETS:

The Council was established in April, 2014 to provide the Government of Ontario recommendations designed to maximize the value of certain Ontario Government owned assets, namely OPG, LCBO and Hydro One.

This policy review was to consider the following:

  • Improvements to customer service
  • Increasing operational efficiencies
  • Maximizing financial returns

The overall objective of the policy review is to ensure that the Province is getting the most value from these assets that provide significant revenue used to support infrastructure development, health care, education and other government services. The one restriction on the Council's mandate was to assume continued government ownership of these assets. In terms of timing, the Council was to release its initial findings in the fall of 2014 and its final report in the Spring of 2015 to inform the provincial budget process.

Key members of the Council include: Ed Clark, Chair and former Chief Executive Officer of TD Bank Group, Frances Lankin, former United Way of Greater Toronto and NDP cabinet Minister and Janet Ecker, President of the Toronto Financial Services Alliance and former Minister of Finance. Other members include: David Denison, former Chief Executive Officer of the Canada Pension Plan Investment Board and Ellis Jacob, President and Chief Executive Officer of Cineplex Entertainment.

CONSULTATION PROCESS:

The Council met over the course of the past several months with various stakeholder groups and the senior management of the LCBO, OPG and Hydro One. These were private meetings arranged directly by the Council. As the Council moves into phase two of its analysis, additional consultations with stakeholders will be conducted. This second phase begins immediately.

RECOMMENDATIONS OF THE COUNCIL ON OGP AND HYDRO ONE:

The following recommendations are taken directly from the remarks made by Ed Clark at the C. D. Howe Institute on Friday, October 17:

OPG:

  • OPG contains two separate businesses: nuclear, which is very complex and expensive and hydro-electric and thermal, which is more stable.
  • OPG needs to focus on the Darlington nuclear facility refurbishment and on improving its operations and lowering costs. OPG needs to ensure that the Darlington project comes in on time and on budget.
  • OPG should create an internal structure, as if nuclear and hydro-electric/thermal are two separate businesses "this could lead to two separate organizations—a nuclear company with a board that has predominantly large project management experience and a non-nuclear company".
  • Restructure existing labour agreements and pension plans to lower costs and ensure that they are stable over time.

Hydro One:

  • Hydro One's transmission and distribution businesses should be divided into two separate businesses.
  • Hydro One should continue to operate and manage the transmission business.
  • Hydro One Brampton could be used as a catalyst for the merger of a number of greater Toronto area (GTA) utilities; the merged entity could bring in private capital and the Ontario Government could sell down its interest.
  • Hydro One's distribution assets should be used to facilitate but not force the consolidation of other municipally-owned electricity distribution companies ("LDCs").
  • "the Council is recommending the separation of the transmission and distribution businesses currently within Hydro One Networks. We would then dilute the government's interest in that resulting distribution business by bringing in private capital. We would retain a minority share. This new company would then have the capacity to undertake further consolidations.... We would expect other municipalities to respond by joining these entities or seek their own new partners—public or private."
  • Maintain Hydro One Networks distribution whole—it will have the capacity to undertake other consolidations and it should not be broken up or merged with other LDCs unless there are clear benefits to ratepayers and the overall value of Hydro One Networks distribution is not materially impacted.
  • The Province will be sensitive to labour issues resulting from these changes but expects to find mutually acceptable solutions.
  • The Province would have unspecified control rights over future changes in ownership.
  • Distribution rates cannot go up as a result of any sale; savings from greater efficiencies and economies of scale to be passed on to distribution customers.
  • The Province of Ontario will realize less income from Hydro One and OPG but improvements being recommended will be greater than the lost income.

NEXT STEPS FOR THE COUNCIL AND GOVERNMENT:

The Council will consider the various barriers and disincentives to the consolidation of the distribution sector and make further recommendations to remove those barriers in its final report in the Spring of 2015.

The Government's official reaction to the remarks by Mr. Clark were supportive and in line with the goals set for the Council. As stated by the Premier,

[I] have asked the Council to build on its work by entering phase two. As the Council members move forward, they will broaden their commitment to a collaborative and transparent process and deepen the relationships they have established with all parties.....I look forward to receiving a summary of the council's initial findings in its interim report, and to releasing this report prior to our government's Fall Economic Statement (press release October 17, 2014).

The Ontario Government intends to build the final Council recommendations into its budget process for the spring of 2015.

IESO AND OPA MERGER UPDATE:

On July 24, 2014, Bill 14, Building Opportunity and Securing Our Future Act, 2014 ("Bill 14") was passed by the Ontario legislature and received royal assent. Among other changes, Bill 14 amended the Electricity Act, 1998 to amalgamate the Independent Electricity System Operator ("IESO") and the Ontario Power Authority ("OPA"), which will cease to exist as separate entities and will continue as the Independent Electricity System Operator ("New IESO").

The Ontario Minister of Energy has stated that on January 1, 2015 the OPA and IESO will be "formally merged, to create a more efficient procurement and planning system operator".

The legislation provides that the assets, contractual obligations and liabilities of the IESO and the OPA will all be automatically assumed by the New IESO as a result of the merger. Bill 14 provides for the separation of the New IESO's market operations from its contract management and procurement activities. The details of how the separation of market operations and energy contract management will be implemented are still in process. The legislation also stipulates that there will be a new CEO and new board of directors for the New IESO—all of those appointments have not yet been announced.

A working group is addressing major implementation issues and further details are expected to be announced prior to January 1, 2015.

About BLG

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.