ISSUE

As of Monday, July 16, 2018, the newly elected Ford government introduced the first major legislation titled, Bill 2, Urgent Priorities Act, 2018. Omnibus in scope, the act seeks to: increase cabinet control over Hydro One compensation, cancel the White Pines wind project in Prince Edward County, and end the strike at York University that initiated in early March.

Notably, the Act will give the province immunity from civil liability arising from this legislation. Bill 2 reached Third Reading on July 25, 2018. With a majority government, Bill 2 is suspected to pass, very quickly by the end of the week.

BACKGROUND

Bill 2 is intended to deliver on several commitments and election pledges made by the PC government, such as Ford’s fundamental campaign promise to “clean up the hydro mess”. Tabled in the legislature by Honourable Greg Rickford, Ontario’s Minister of Energy, Northern Development and Mines, and Minister of Indigenous Affairs, the 26-page omnibus bill contains three distinct schedules in relation to energy, environment, and education:

  • Schedule 1: Hydro One Accountability Act, 2018
    1. Constraints are placed on compensation for the CEO, board members, and other executives of Hydro One Limited and its subsidiaries.
    2. The Ontario Energy Board Act, 1998is amended to provide that the rates charged by Hydro One Limited and its subsidiaries shall not reflect amounts paid for executive compensation.
  • Schedule 2: White Pines Wind Project Termination Act, 2018
    1. Termination retroactive to July 10, 2018 of the White Pines Wind Project and its associated contracts and agreements between the IESO and other parties. It also terminates the Renewable Energy Approval and species-at-risk permit related to the facility.
    2. Compensation is payable out of money and may be further set out by regulations made under the Act (formula set out in act).
    3. Section 5 extinguishes any existing proceedings, and prevents future proceedings, against the Crown, the IESO, and other related parties.
  • Schedule 3: Back to Class Act (York University), 2018
    • It addresses the labour disputes between York University and the Canadian Union of Public Employees, Local 3903. It requires the termination of any strike or lock-out and provides a “mechanism” for achieving new collective agreements.

 ANALYSIS

  •  Schedule 1: Hydro One Accountability Act, 2018

Hydro One went public in November 2015. By December 2017, Ontario had a minority stake in Hydro One shares with only 47 per cent control. According to the winter 2018 FAO report, once the utility’s $4.4-billion merger with U.S. energy firm Avista is finalized, Ontario’s ownership will further dilute to 42 per cent.[1]

The Ontario government claims that Bill 2 will “improve transparency and accountability” at Hydro One by giving the cabinet the authority to veto over a new “compensation framework” for its CEO and board members. To be established within six months of the legislation coming into force, this new framework is to be created by Hydro One in consultation with the province and the five other largest shareholders, prior to being subjected for approval by cabinet.

Further, the bill will change the rules so that the Ontario Energy Board (OEB) is unable to take executive compensation into account as a cost when setting consumer rates for hydro. It also requires Hydro One to publish total executive compensation, something already done through its annual management information circular.

Importantly, the government says the act would also give the province and Hydro One immunity from civil liability (under Section 6 of Schedule 1, titled: Termination of Rights and Crown Immunity).

  • Schedule 2: White Pines Wind Project Termination Act, 2018

Bay of Quinte and local MPP Todd Smith, who was named Ontario Government House Leader by Premier Doug Ford, singled out three priority areas where the government intends to introduce urgent legislation. Among of which, if passed, Bill 2 will cancel the White Pines wind project to build nine wind turbines in Prince Edward County. The project has been under development for nearly a decade by the shores of Lake Ontario and was on track to operate by September 2018.

The Independent Electricity System Operator (IESO) was heavily criticized for first, issuing a new Feed in Tariff (FIT) contract to the company, wpd Canada, after an Environmental Review Tribunal reduced the original project from 27 to nine turbines.  Past May, IESO went against standard election practices by awarding wpd Canada a Notice to Proceed with the project just two days into the provincial campaign period. wpd Canada president Ian MacCrae indicated that the company will be seeking full compensation if the project is halted. The Act sets out a formula for reimbursing the company for development, employment termination, and decommissioning costs, minus other revenue like insurance proceeds (under Subsection 6(2) of Schedule 2, titled: Compensation).

The Act also requires the contract holder to “decommission the project in accordance with regulations made under the Act or under the Environmental Protection Act. In addition, it must maintain the lands in a clean and safe condition and ensure they are left that way when it leaves. wpd Canada is liable to the Crown for any costs or liabilities the Crown may incur as a result of a failure of wpd White Pines Wind Incorporated to meet these obligations.”

Minister Rickford confirmed that if passed, the bill will protect hydro consumers from any costs incurred from the cancellation. Even after all costs are accounted for, ratepayers can expect to benefit from $790 million in savings from this one decision.[2]

Other upcoming provincial legislation to be flagged: the scrapping of Ontario’s cap-and-trade carbon tax law.

 

Footnotes:

[1] Financial Accountability Office of Ontario (FAO) Report on Partial Sale of Hydro One, pg.4

[2] https://wawa-news.com/index.php/2018/07/13/ontario-to-cancel-758-energy-contracts-to-bring-hydro-bills-down/

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