ThinkEnergy

Summer rewind: Ontario's electricity sector is evolving, as the province navigates the transition to cleaner energy amidst rising demand. In thinkenergy episode 135, we explore the grid's structure and key players, highlighting the crucial role of distributors (Local Distribution Companies or LDCs) in facilitating this transition. Guest Teresa Sarkesian, President and CEO of the Electricity Distributors Association (EDA), sheds light on LDCs' frontline efforts and contributions shaping the energy landscape.

Related links

• Teresa Sarkesian on LinkedIn: https://www.linkedin.com/in/teresa-sarkesian-53898613/

• Electricity Distributors Association: https://www.eda-on.ca/

• Green Button information: https://www.oeb.ca/consumer-information-and-protection/green-button

• Electrification and energy transition panel report: https://www.ontario.ca/document/ontarios-clean-energy-opportunity-report-electrification-and-energy-transition-panel

• Ontario Electricity Support Program: https://ontarioelectricitysupport.ca/

• Trevor Freeman on LinkedIn: https://www.linkedin.com/in/trevor-freeman-p-eng-cem-leed-ap-8b612114/

• Hydro Ottawa: https://hydroottawa.com/en

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Trevor Freeman

Hey everyone. Well, it's officially summer, and the think energy team is taking a break to recharge over the next two months, but also to plan our content for the fall. So stay tuned for some great episodes in the fall. Not to worry, though, we still have our summer rewind to keep you engaged. This is where we pick out some of the great past episodes that we've done and repost them. So whether you're lucky enough to be sitting on a dock or going on a road trip or if you're just keeping up with your commute through the summer, it's a great time to revisit our past content. You will hear past episodes from my predecessor and the host chair, Dan Sagan, as well as a couple of mine from the past few months, and you're welcome to check out your own favorite past episodes as well. Wherever you get your podcasts. We hope you have an amazing summer, and we'll be back with new content in September, and until then, happy listening.

Trevor Freeman 0:07

Hi, welcome to think energy, a podcast that dives into the fast-changing world of energy through conversations with industry leaders, innovators and people on the frontlines of the energy transition. Join me Trevor Freeman, as I explore the traditional, unconventional and even up and coming facets of the energy industry. If you've got thoughts, feedback or ideas for topics that we should cover, we'd love to hear from you. Please reach out to us, at think energy at hydro ottawa.com Hi, everyone, welcome back. Now it's no secret that Ontario's electricity sector is transforming rapidly as it moves to both decarbonize the grid itself, you know, we have a very clean grid in Ontario, but it's not totally carbon free. And to support the growing demand for electricity as our customers across the province, take steps to electrify and change how they use energy. The show is all about exploring those changes, among other things, and today is no different. But before we dive into our conversation today, I think it would be helpful for me to spend just a few quick minutes on some basics about how our electricity grid is structured in Ontario, and who some of the key players are. Now I know some of our listeners will know this already, but it can be hard to keep track of all those key players. And Ontario's structure is a little different than some of the neighboring jurisdictions no two jurisdictions are exactly alike. So, a refresher is never a bad thing. Now the most basic description is that electricity is largely generated at central generation facilities. So, think nuclear power plants are your electric generating stations, some gas fired generating stations and large-scale wind and solar installations. We call these entities generators simple as that. That electricity is then transmitted across the province in an interconnected grid of high voltage transmission lines, which also connect to other jurisdictions such as neighboring provinces and states, and Ontario, Hydro One runs the transmission network. Now you've probably seen this transmission network. These would be the large metal towers that you see out in the middle of a field when you're driving along the highway or in rural areas that have electricity wires strung way up high in the air. The last stage before it gets to the end user is called distribution. So, this is where electricity is taken from those high voltage lines stepped down to a usable voltage for residential and commercial customers via transformers and substations, and then distributed over a network of overhead and underground wires, then these would be the wires that you would see at the top of those wooden or composite poles that are along the side of the road in your neighborhood. The entities that run this distribution part are called distributors, again, simple as that. So, there's a few other key players that are worth mentioning here. Energy Policy is primarily the jurisdiction of the provincial government, who sets the general direction and associated rules and regulations accordingly. The Ontario Energy Board or OEB is the regulatory body who governs what all those other players do and enacts the government mandate. And finally, at least for today's purposes, we have the system operator. It's called The Independent Electricity System Operator in Ontario, or IESO, who runs the system. So, if you're in Windsor, Ontario, or Ottawa, or North Bay, and you want to turn on your air conditioner, or plug your EV in to charge, the IESO is responsible for making sure there's enough power on the grid to handle that load. So, I hope everyone is still with me and feel free to pause and do some jumping jacks if that was a lot to take in. Our conversation today is going to be focused on the role of the distributor. So, for full disclosure, as you know, I work for hydro Ottawa who is one of those distributors, we serve most electricity customers in the City of Ottawa, and the neighboring village of Casselman and in Ontario, you will often hear distributors referred to as local distribution companies or LDCs. So forgive me if I slip into that acronym throughout the conversation today, that's really just the sort of common name that we refer to those distributors as. But I'll try to mix it up and make sure that, that I'm explaining that acronym throughout as well. So the distributor is really the front line, the customer facing entity of the entire electricity system. If you are an electricity customer, and you think about the electricity system, you are probably thinking about your distributor. Chances are you get your bill from a distributor, even though for most customers, most of what you pay on that bill doesn't actually go to the LDC. Some of it stays with your local distribution company, but most of it goes to the transmitter to the generator, to the IESO etc. When the power goes out, it's probably your LDC that you call and it's your LDC that will give you a restoration time. Sometimes outages are caused by issues up the line, so to speak in the transmission portion of the grid. But often the issue is a localized one. And it's your LDC that is identifying the problem and fixing it, whether that means rolling a truck to string new cable, or performing switching to work around the problem. And finally, it's your LDC that is really on the frontlines of the energy transition. While all parts of the grid must then have started to change, the LDCs are really working hand in hand with our customers to identify where and how fast and new demand is needed to bridge that gap between customers and policymakers to enable more and more renewable generation. And also to determine what new technologies or programs we need to pilot and scale up. And it's really the LDCs that are driving change in the way that electricity is managed at the individual customer level moving forward. So to help us make some sense of this, I'm happy to have Teresa Sarkesian on the show today. Teresa is the president and CEO of the electricity Distributors Association, which is a role that she's held since 2016. This is actually Teresa second time on the show the first being back in December 2021. So we're happy to have Teresa back, Teresa, welcome back to the show.

Teresa Sarkesian 6:23

Thanks so much, Trevor. I'm really delighted to be back.

Trevor Freeman 6:27

Yeah, we're glad to have you. So, like I said, you were back on our show in 2021. I don't know if it's because of how COVID has changed our lives or if this is just the way things go. But sometimes, you know, weeks seem like years. So 2021 is a long time ago. Let's start by refreshing our listeners on the role and mandate of the electricity Distributors Association.

Teresa Sarkesian 6:49

Sure thing so the electricity Distributors Association, or the EDA our little acronym represents Ontario's public and private electric utilities that distribute electricity to 5.4 million homes, businesses and institutional customers across the province. And I should note that those 5.4 million customers really refers to build accounts so you have families that are behind a build account. So effectively the millions and millions of Ontarians and businesses that operate and live here are customers of our utilities. And as you know our members are on the front lines of power, and have developed a strong trust with their customers by providing safe, reliable and affordable service for over 100 years. The EDA itself provides analysis and networking and advocacy for our members to ensure that the energy policy direction and framework in Ontario is fair and balanced, supporting the financial viability of utilities to deliver service and ensuring affordability for customers. And long term, we are looking to ensure that our local distribution company members can become the premier energy solution providers to their customers, and that they're able to provide the value-added services that customers are already expecting from them but are going to grow with the energy transformation and electrification in the future.

Trevor Freeman 8:09

Yeah, it's kind of like I said, when people think about the electricity sector, they're probably thinking about their distributor. And the EDA is kind of that common voice for those distribution companies. So, you first joined the EDA back in 2009, and have been the president and CEO since 2016. So, we'll look ahead and talk about the future in a minute. But before we do that, tell us about how things have changed so far during your tenure. How are things different from 2009 When you first joined the organization?

Teresa Sarkesian 8:40

Yeah, and you know, this is almost like perfect timing, Trevor, because I've been at the association now for 15 years, I'm just marking my 15-year anniversary. So, feels really apropos to kind of reflect and look back. So, I want to break down my answer into two parts. So, I'm going to talk to you about some, I guess, just my own personal observations about the electricity system at large. And then I'm going to talk more about the changes in distribution. But some of the changes that I thought were really quite significant and profound, sort of when I joined the industry in 2009, I joined at a time when there was the Green Energy Act, and the province was looking to connect all kinds of renewable energy generation to the electricity grid. So that was fairly significant. Another thing that was happening with the province is that they closed down coal fired generation. That was pretty massive. In fact, I think, at the time, it was the largest kind of carbon reduction initiative in North America. And I think even to this date today, I think it still is something that Ontario really has to be proud of. Another thing that you know, at the time, I think that was you know, fairly significant in 2015 is just the expectation of what the demand would be. What was interesting, sort of like the past for 15 years, the demand from customers for electricity was actually flat or declining. And that's all changed. Now. 15 years later, we're, we're now forecasting, massive increases in in demand of energy, which could potentially be doubling in the future. And the other point I'd like to make is just the nuclear renaissance that we're having. I think when I joined the sector in 2009, I'll tell you, I think the public opinion of nuclear was actually quite low. And that's been completely turned around lots of geopolitical events around the world, I think, have driven that. And now that nuclear is having a huge Renaissance. And you're seeing, you know, lots of new investments in nuclear. And we're not talking about shutting down reactors anymore. We're talking about refurbishing and expanding. So those are some of the things that I've observed over the last 15 years that have really changed. And for local distribution companies, I think what I have seen is a growing expectation by both government and the regulators for electric utilities to do more to both support the grid reliability and meet growing expectation from customers. So, I started in the sector in 2009, it was right on the brink of implementation of smart meters, and time of use. And what was interesting is that was mandated, there were very few jurisdictions in the world that actually had mandated smart meters and time of use pricing. So again, Ontario is was one of the first. And so that was a big change for LDCs. To move from, you know, smart meters and having to bring in that technology and also support the technology of time of use. I did mention the Green Energy Act at the time, we suddenly had to connect 1000s and 1000s, of new solar and wind generation, as well. And that was all new. There were no protocols, there were no standards for that. So that was fairly significant as well. And when I kind of fast forward to I guess, more recently, there have been a lot of changes from government, I think they've really supported our industry, they understand the trust that we have, with our customers. And they've implemented, you know, a number of new changes in terms of rate structures, they've asked us to implement ultra low-rate pricing that can support overnight electric vehicle charging. And they've also asked us to introduce a green button digital platform that allows customers to download their energy data and share with third parties for you know, different assessments and tools for lowering energy costs. But it's all not, you know, unicorns and kittens, there's challenges to for our sector, grid resilience was, you know, not really, people talked about it in 2009, but not like they're talking about it now, because of climate change. And we are seeing more frequent storms, causing, you know, obviously, outages for the customer, and also significant damage to the distribution grid. And I know that hydro Ottawa has faced more than its fair share of very destructive storms over the past few years, we have Yes, I can't remember which Victoria Day weekend where we had, I didn't ever know how to say it the derecho or the derecho. So there, we weren't getting storms we've never even heard of before. And unfortunately, I think that is our new normal. So, grid resilience is something that we are very concerned about, and we need to make sure we've got the appropriate investments for that. So those are just a few of the highlights that, you know, when I came into the sector sort of things that were kind of ramping up, and then what's happening now, but I guess what I could say, the commonality is there's constant change in the sector. And what I'm seeing going forward is that change is going to be accelerated.

Trevor Freeman 13:40

Yeah, I mean, it's, it's fascinating to listen to you lay it all out like that. Thinking back to 15 years ago, it's hard to even remember, you know, not having smart meters, having meters that really just ticked forward and measured your consumption over the course of a month, and someone would come and read that. And, you know, having declining or even flat demand profiles that aren't increasing is so different from the world that we are in today. But I think what you said there at the end is really important. We are in our industry, an organization that knows about change, we're constantly changing, which helps us as we look forward into your point, we're going to see that level of change and the pace of change accelerate. So, I think that sets us up pretty well. So, let's start to look forward, then I know that the EDA is about to launch a new vision paper. So, we're going to dive into some of the details. But maybe let's start by kind of a high-level summary of what is the vision that you are trying to lay out with this paper?

Teresa Sarkesian 14:42

Okay, and no problem. So, I think what I want to start just give a little bit of background as to why we did this. We've done a couple of vision papers and implementation plans in the past. But you know, they were like seven, eight years ago and things have changed a lot even in Seven or eight years. So, what we've been seeing, obviously, I think the big change over the last few years has been the big focus on meeting Net Zero targets in 2050, that we are going to get to net zero in terms of our greenhouse gas emissions. Not only in Canada, but this is actually a bit of a global commitment, you know, for countries that have signed on to that objective. So, what happens when you set up, you know, those big audacious goals? You have all kinds of organizations and entities looking at how are we going to get there, how much it's going to cost? What do we need to do to get there? And so when we started reviewing some of these publications, both in Ontario, Canada, and actually in other jurisdictions, they were very good. They talked about what supply mix that we need the investment in transmission, but almost 100% of the papers, Trevor, if you can believe this, just neglected distribution, no one talked about distribution, they didn't talk about how distribution is going to have to change what the investments would be. And then we'll so we said it's going to be critical for us to identify the electric utility role and the energy transition, and how the sector will need to be grid ready to support electrification, economic development, grid resilience, and customer preferences. So we view that LDCs are going to be pivotal in enabling Ontario's low carbon economy, navigating the challenges posed by climate policies, electrification trends, and these evolving customer demands. And with Ontario's growing economy and the demands for housing intensify, LDCs must innovate to effectively meet these accelerating electricity needs and changing preferences. And right now, we've seen the ISO is predicting significant consumption growth from 144 terawatt hours in 2023, to 240 terawatt hours and 2050 not quite double, but it's getting close. And so this rapid growth demands urgent attention to adopt new strategies and to ensure that the local distribution companies can make the necessary investments in grid enhancements to expand the capacity and capability of the distribution system. So while reliability and affordability remain Paramount customers do expect additional value from their utility service. And, you know, we are seeing all sorts of things that are happening, you know, such as the need for swift electric vehicle charging installation, and other upgrades that will increase the electrical load. We see that LDCs are more frequently interacting with businesses that seek utility partners to achieve their energy management, sustainability and ESG goals. And in parallel, the LDC must prepare to respond to increase climate change induced extreme weather events. So recognizing the essential role of LDCs in the energy transition, we've worked in collaboration with industry experts to outline a vision of the role of utilities, so they can enable economic development, housing growth and electrification. And the report identifies urgent and practical steps that LDCs in partnership with the government, and its agencies must take in the near term to achieve the benefits of this transition. So what you'll see in the paper is recommendations related to the need for clear policy direction on regulatory frameworks to support LDCs in becoming grid ready, and with a continued focus on affordability and enabling a customer choice and opportunity. And we also discuss issues like workforce needs. And we also emphasize the role of human capital in enabling technological advancements. So that's very high level what it is, and I will get into it a bit more as we have our discussion further.

Trevor Freeman 18:41

Yeah, I think it's a good way to frame it of the entire sector is changing at all levels. But what you're really doing is laying out that vision that roadmap for the distributors, in particular, and I think that's great. Maybe like, Who is the audience for this paper? Who are you kind of directing this at?

Teresa Sarkesian 18:59

Well, we're still putting the crossing the T's and dotting the I's., but I think it's about 80 pages. So, it's not going to be for everyone, obviously, you know, government decision makers, government, policymakers, people that work in their regulatory agencies and our energy board, the Independent Electricity System Operator, we did try to make it accessible. There is an executive summary that's about two or three pages, which I think will be of great interest to a lot of people to read. And I think it gives a very kind of a high-level overview of what's in the document. So that's something that we're trying to do. And, you know, obviously our LTC members are an audience as well. They've been working with us hand in glove the last few months we've had extensive member meetings we had a board committee that helped steer this paper. But you know, ultimately, the paper is really focused on our customers because its customers and businesses that are driving a lot of this change for the future, whether it's businesses that are on their own journey on environmental, social and governance ESG objectives, and they're looking for more low carbon communities to invest in its customers who are very interested in EV charging, and maybe what the opportunity for the batteries can be to sell that storage back to the grid. It's, it's really the customers that are driving this change.

Trevor Freeman 20:31

Right Yeah, and I mean, the nature of this medium is I don't know who's out there listening. But I'd encourage, you know, all of our listeners, when this comes out, take a look at it and get some insight into kind of how the distributors role is laid out there. So let's dive into some of the details. You know, you outline obviously, some of the traditional roles and functions of the LDCs. So from maintaining, owning and maintaining the infrastructure, the poles and wires, and doing customer metering and billing, that stuff's not going away, we're gonna keep doing those things. But you also highlight some of these emerging roles that have begun to appear, or that we'll see in the next couple of years, you know, a more of a focus on distributed energy resources, like solar on roofs, for example, that LDCs are going to have to work to both enable as well as integrate into our own systems. It's going to include things like more customer programs, and rate design, etc. I'm curious, you know, how are LDCs going to balance that traditional role that we've already been doing, along with this rapidly new expanding set of roles that we need to tackle?

Teresa Sarkesian 21:38

That's a great question, Trevor. So look, LDCs will continue, as we always have been to be responsible for safe, reliable and affordable delivery of electricity to customers, customers can count on us to do that 24/7. And even with all these anticipated grid expansions, we're not going to be shut down, if the critic dispatches so, you know, we're experts at multitasking in our sector, and we will continue to do so. And with the increases, as you mentioned, in distributed energy resources, and electrification, there are the pressures for us to adapt, modernize and change how we ensure the safety and reliability in the service to customers. And the emerging roles and responsibilities aren't something that's in the distant future. You know, as I mentioned before, changes the constant, we have been engaging in ongoing adaptation. And so when I think about the future, and I think about what we call grid modernization, it really is part of the ongoing continuous improvement, and the pursuit of the digital utility of the future, that every utility is on that journey. So you know, utilities have been bringing in new technologies, particularly related to information technology, communications, and digital solutions. And so while we're in early stages, we are expecting our members to become more digitally based in the future, they're going to be introducing advanced distribution management systems to monitor the grid. And they're also going to have distributed energy resource management systems to monitor all the connections that are behind the meter. So I think what is different now than in the past, is simply that the pace of change is being dramatically accelerated. So for example, it took us about 100 years to get the grid to its current size, yet, we need to almost double the current grid in 25 years. So we have to move four times as fast. And the grid is not going to be built with just simple poles and wires and one way energy flow like it has been for basically the last 100 years, it's going to be a lot more complex, we're going to see two way energy flows, so it's not just us sending power to the customer one way, they're potentially going to be selling back their energy generation or their energy storage back onto the grid. So we need to have that temerity, that two way, power flow. So that's going to be a big change. And we also expect there to be a lot more customer interaction. They want to leverage their own generation and storage behind the meter. And we as utilities, want to be able to leverage that to help us with you know, reliability, Storm outage, other emergency situations. So we see there's going to be a greater interactive relationship with customer than simply, you know, maybe sending a bill to them or offering them conservation programs, it's going to be much more dynamic than it has been in the past. And so, you know, over the last two decades, and we talked about this a bit already, the utility has been modernizing the system in response to government policy initiatives, regulatory requirements, and customer preferences. One other example, recently, utilities were required to implement something called green button. And we've been also engaging by bringing them more into the system through net metering. And a lot of our members are also involved in various pilot projects with the Independent Electricity System Operator and with Enercan to look at all kinds of new LTC models and functions. So and you're going to see a lot of this actually, in our vision paper is that to really be effective, cost effective. To make sure this happens at the accelerated pace, we do need for there to be proactive policy and regulatory changes, to remove barriers and empower LDCs to embrace these new evolving roles in shaping the future of the energy sector. And as I mentioned before, customers are demanding it. And I want to point out a research report that came out by the International Energy Agency just late last year. And they made it very clear that in quite a number of countries around the world, the lack of the regulatory permission to provide more investments in the distribution system is now becoming a significant barrier to new renewable energy projects connecting on the system. And while we don't have that situation here in Ontario, if we don't start moving quickly, in terms of reforming the regulatory context, then we might be like some of these other countries, and we don't want to be that a barrier, you want to be able to enable what our customers want on the grid.

Trevor Freeman 26:07

Yeah, so I'm going to ask you a question about that last point in a minute. But I think your framing of the ways that the sector is going to change, and the way our customers are going to interact with us is going to change is really great. And it's something that you know, often comes up in conversation. And I often say, there is no single strategy or tool here, we can't solve the coming challenges with just more poles and wires. We can't solve it with just new innovative solutions, we need all of those things, we need more poles and wires. But we also need more programming, more innovation, more technology, we need to utilize those distributed energy resources out there on the grid. So, I think that's a great way to frame it. Okay, so let's talk about grid planning a little bit. So LDCs play a really key role in helping forecast the needs of the future, both for our own distribution systems, but also feeding up into those broader provincial needs. So, the insight that we gain from our customers, we pass up to the IESO, for example, so that they can do planning at the provincial level. Traditionally, this is a pretty consistent process. You know, in the past, we get a sense from municipalities and developers, how cities are going to expand and grow. And we've generally been able to count on the typical home using roughly the same amount of electricity as homes that are out there today. So, we account for a certain expansion of commercial customers based on the Intel that we get from those customers. And we know roughly what they're going to use. The problem is that model's kind of being turned on its head a little bit. So, we now need to account for even our existing customers increasing their load because they are electrifying or they want to add EV chargers. And new developments today are likely going to have increased demand compared to some of the historical developments, because we're going to see all electric communities or at the very least more electrified and uses. So I know you don't have a crystal ball yet that tells us exactly how this change is going to happen. But what are LDCs doing to adapt their long term grid planning to account for this uncertainty?

Teresa Sarkesian 28:22

Yeah, you're so right, Trevor forecasting is getting more challenging. And I just want to start with a little story before I get into my answer about that. So, you know, electric vehicles are kind of the hot thing right now. And you know, although people I think are still on a waiting list for certain cars, there's lots of others that are available. And so one of the concerns that our sector had was we didn't know where these electric vehicles were going to pop up. And we weren't getting any kind of pre advanced warning when people started making orders or, you know, advanced purchases for electric vehicles. So we actually did a great advocacy campaign, with the province with both the Ministry of Energy of the Ministry of Transportation, to secure postal code data for utility, so they could see where people were going to be purchasing electric vehicles to help them with their own planning, in terms of, you know, making sure that their local feeders were upgraded their local transformers, and so that just got announced a year ago. But that's obviously not going to be good enough. And that just tells us about electric vehicles, you know, in the near term, but this is I think, you know, having sightlines into our customer behavior, whether we do that proactively with you know, consultations and communications with customers, or we can do it by you know, pinging the meter, or getting data such as postal codes. We are going to have to, you know, adapt and have greater visibility and sightlines into the customer. And so this is that some of that technology that I was talking about earlier, the sophisticated future grid is going to need lots of visibility and transparency, for usage and investment to be able to, you know, look at these two way power flows, look at how customers are behaving, in order to better plan the system, we also need to maximize and optimize the data that we have, you know, from our planners, it's going to be vital to protecting the grid reliability and resilience, we're going to have to have more partnerships with municipalities, in terms of their energy planning for the future and things that they want for their community. And, you know, one of the things that we're asking for on our paper is actually to, you know, rethink the distribution system plan, that the utilities have to file with the OMB every five years, and start building in a, you know, Grid Modernization plan within that broader plan. So we can get the regulator to start looking ahead and seeing what these requests are, it'll be important to also have various performance metrics and filing guidelines for grid modification from the energy board. So you know, these are some of the things I think that the membership is going to have to look at but it is going to be a very iterative experience, because it's just it's the pace of change is the big unknown. And so everyone talks about these things. But you know, I saw something today, I think it was from Ford Motor Company, and they're kind of slowing down, it's taken them a while to retool their plants. So that could take an extra two years now for them to be up and running and producing electric vehicles. So there's going to be all these other pieces of the puzzle that are constantly going to be changing a moving and evolving. It is I think, planning for the future is going to be very challenging. And I do expect the province to start talking about this higher level, maybe starting at the end of this year, they just came off a massive exercise related to the energy transition electrification panel. And I do expect to see more guidance from the province as well, in terms of how they're going to manage this planet, because it's not just planning for us. It's planning for everybody else in the system, too.

Trevor Freeman 32:02

Yeah. And for listeners out there, if you haven't had a look at that energy transition electrification panel reports, a really fascinating read. So I'd encourage you to take a look at it. You mentioned a lot of interesting things there. So for our listeners, and I'll probably do a future episode on this so I won't get into detail, but LDCs typically have to file five year rate applications once every five years that really lay out their plans for those five years and how they're going to fund them. So coincidentally, hydro Ottawa was getting ready to do our next one. And like I said, I'll probably talk about that on a future episode. But one thing we did when it comes to forecasting is, we conducted a electrification study that looks at if we electrify by 2050, like our plans, say we will and you know, society wise, what does that mean for the grid? And some of the inputs we took is, you know, what are the federal plans for electrification? What are our own municipal plans for electrification? What are we hearing from our customers, and that really, is helping us modify and change how we do grid forecasting, based on some of the changes that we're seeing from our customers. So I think this is a really important piece that, like you said, we're going to need to iterate on we're not going to get it right the first time. But we're starting to think of how do we need to change the way we do things in order to keep up with what our customers are doing.

Teresa Sarkesian 33:28

I think one thing I've seen more of the last few years, because this is much more complex than it's been in the past that I've seen, like the IESO, for example, they've done more, you know, scenario setting. So when they've had their, you know, their APO's and AER safe, they sort of had other two or three scenarios, and they're constantly updating their numbers every year. So these are other changes that we're starting to see. And even myself, I was just looking at the provincial budget detail the other day, they also set out, you know, scenarios as well. They're just not picking Oh, it's going to be, you know, X amount of deficit. And you know in 2028 they're actually forecasting out different scenarios. So I think that's another piece I see more in play, that people will, you know, showcase what assumptions they have, and will have maybe two or three different scenarios as well.

Trevor Freeman 34:21

Yeah, and I think it's a, it's a great way to tackle that unknown component to where we've never really been through a change like this before. We've never wholesale changed the way we use energy in our society. So there's a degree of uncertainty, obviously, and I think, targeting out that kind of, let's call it high, medium, low scenario, or whatever the metric might be, is going to be really critical for us to make sure we're staying within the boundaries of what's possible and what's probable and refining that constantly as we move forward. So that's a great point. Something else you mentioned a little bit ago, that's, you know, could be a bit of a nebulous term is grid modernization now I've actually got a future episode, and specifically about grid modernization and what hydro Ottawa is doing, I think it might actually be our next one. So we don't need to go into all the details on this. But let's just help our listeners understand what do we mean when we're talking about grid modernization? And why is this important? Why is it important to our customers that we do this kind of back office improvement?

Teresa Sarkesian 35:23

So I'm going to keep it really simple, because I know you're going to do a deep dive on it and a future episode. But essentially, Grid Modernization are improvements that LDCs will make simply to augment our capabilities, and enable us to offer new or improved services to customers. So back office improvements might look like things like real time sensing, and monitoring systems to improve efficiency and reliability. Or we may be investing in new digital infrastructure communication systems to improve safety, cybersecurity, it can also include more visible improvements to safeguard our infrastructure against extreme weather, and climate change to reduce outages. And like one, I guess, example that some of your customers might already be recognizing, you know, we made investments in green button, which enables customers to download their data, send it to a third party if they want to save on customer use. So it really is the whole soup to nuts, it really is not just one type of technology or solution. It is a combination of a whole series of things that the that the utility will need to do. And I think why we want to do it, I think when we look at all of the pressures on the system, from NetZero objectives to housing priorities, you know, to accelerate broadband development, and support electrification, the pressures seems to be never ending. And the only way that we can respond to all those pressures, is to be grid ready. And, you know, like I said, it's it is a form of continuous improvement. It's just that now it's the pace accelerated pace is such so extraordinary, that we need to have a more dedicated plan. But most importantly, we have to make sure we have dedicated attention by policymakers and regulatory decision makers as well. Because right now, there isn't that dedicated attention to this very important task. Yeah,

Trevor Freeman 37:28

Yeah, I mean, it's, it's great that you bring up all these pressures that we're feeling that it's I think it's time we kind of talk about that elephant in the room, our customers often ask us about affordability, or we're hearing from our customers about affordability, I was actually at a customer event not too long ago, and talking about the change that we're going to see here talking about some of this, you know, large scale transition of our of our energy sector. These are not small investments that we have to make. We're talking about both an increase of our infrastructure, you know, you mentioned almost doubling the capacity of the grid. We're talking about modernizing our grid systems, that's a lot of back office work with new technology, and bringing on new programs. Like this is a big change. Energy affordability is already a kind of a challenge today for some folks. So as we get into this new investment that we have to make as we start moving down the path of the energy transition, how do we balance affordability, especially for our vulnerable populations, with the level of investment that we know is necessary to do the things that we have to do? Yes,

Teresa Sarkesian 38:42

Yes, that's the multibillion-dollar question, Trevor. And it's something I'm going to carve out my response, because there's some things that we've put into our vision paper for the future, because affordability is absolutely critical. And as you know, this is basically a massive restructuring of the economy going forward. So, there's may be other participants who might be playing a funding role. So, you know, right now, obviously, you know, customers aren't monolithic, and you know, residential customers who are struggling to pay bills. Do you have some programs that they can, that they can access, they have the low income Energy Assistance Program, they have the Ontario electricity support program. Some of those are funded by the tax base, some are funded by other electricity customers. The province also gives a rebate to customers in Ontario, and that's a pretty big rebate. I don't think a lot of residential customers are aware of it but it is over 7 billion annually to residential small business customers. That's a lot of money. But I don't know if customers really appreciate that. So I don't know what's going to be available going forward. These are some of the challenges that you know policy makers, you know, have to address as well. So, when we were thinking about this as part of our paper, we sort of looked at it from a number of perspectives. So, the federal government has set up all these Net Zero targets, they've set out, you know, targets for electric vehicle manufacturing, as well. And so it might be appropriate for them to share part of the burden with this massive energy transformation. And it's interesting, we actually pulled customers about 2000 Customers two years ago, we asked them a whole series of questions about the changes going forward. And customers do have different perspectives about who should be paying for some of this energy transition. So when we asked them about who should be paying for electric vehicle, charging infrastructure, and they said, Oh, electricity, customers should pay for that, because that's something that everyone's going to benefit from. When we ask them about, you know, who should be paying for the electricity grid, to address climate change and hit Net Zero targets, they actually the majority, 58% said, the taxpayer should be paying for that. So I think that's just a very interesting data point. But it's something that, you know, we've been active on in terms of having those conversations with the federal government, saying that, you know, you have offered different subsidies to attract different companies to invest in Ontario, based on our clean grid, but we need to have the whole grid support it. So, you know, we're pursuing federal government support, we also are looking at increased maybe private equity engagement in in our sector. So right now, we have a couple of private members, but there's not a lot of private equity money in the sector, most of our members are municipally owned, and municipalities can't invest in their utility, probably even if they wanted to, because they're in short supply of funds as well, they have their own taxpayer that they have to deal with. So one of the solutions we are putting forward to government is to increase the private equity threshold, so it doesn't trigger additional taxes, right now, it's only 10% ownership. But we're saying that maybe a tool in the toolbox should be up to 49% ownership. So it would allow private equity to come the patient capital, they're not maybe looking to seek a return right away. So there's some you know, flexibility there as well. Another thing we're looking at is to revisit the debt equity ratios of utilities to manage the costs over the long term. So you'd be effectively amortizing on some of those grid investments as well. So these are some of the ideas that we have around how we can basically fund the energy transition going forward. You know, and some people say, Well, if you could get customers to think about their energy usage holistically, so if they're going to be, you know, moving away from a, you know, a combustion engine car, and they're going to be using heat pumps, instead of, you know, natural gas heating in their home, if you could get people to think holistically what they're saving on the kind of, you know, GHG side of things, versus what they are going to be spending on electricity, they may actually be spending less if they look at it holistically, but I don't really know, to be honest with you, so that I'd rather focus on the things that we could ask government for, as opposed to asking customers to be, you know, thinking more holistically at their entire energy usage, which is just not how they think. And I think, to change that behavior, would be quite a monumental task going forward. But those are some of the things that we think about, because we are very concerned about the affordability going forward, because it is such a massive change that we're all experiencing.

Trevor Freeman 43:50

Yeah, I think this is another example of there is no single solution here. There is no you know, silver bullet that's going to help us pay for all of this, we need all the tools on the table here, we need to look at all different options. And I think you outlined a couple of them, you know, in what you said about our customers impression of some of this change and who should pay for it. Last episode, I talked to David Coletto, from Abacus data, and he was saying on the whole Canadians really believe that a an electrified energy system, we know once we make that transition, we will be more secure, it will be more affordable. And I think those customers who have made some transition in their lives can see the benefit of that. But sometimes the initial hurdle is pretty hard to get over that upfront capital cost. And so looking for ways, both at the customer level as well as at the utility level, the LDC level I think is going to be important to help get over that initial capital outlay that's required, so that we can realize those benefits that we all know where they are that we know we'll see. So . Yeah, great filling some of those out. So I know I mentioned that I will get back to this. But I do want to talk to you about the advocacy role that the EDA plays. So you mentioned, you know, talking to governments and Ontario, the provincial governments across Canada, the provincial government has jurisdiction over most energy matters. So advocacy to the government is a key role that you play. I'm curious, what are you asking the government to do or to provide to help some of these changes that we're talking about happen? What is the advocacy that you're pushing for with the government.

Teresa Sarkesian 45:32

So I'm going to try to keep it really simple and just sort of, you know, tie it back to our vision paper for now, because at any given time, I'm working on 20 or 30 l policy issues, primarily with the Ontario government. But this past year, we have expanded our work to also include the federal government, because they have investment tax credits that we are interested in for our members to see if they could be eligible for those. We're interested in them changing things to the Canada Infrastructure Bank, also to provide new sources of equity there. And we're also pursuing grants, as well, for grid modernization. So provincially, a whole whack of issues. But I'm going to go back to our paper just to give your audience a little bit of a sneak peek on some of the things that we're going to be asking for. So one of the first things we're going to be asking for is to get a common understanding and definition of grid modernization, and electrification. And this is not really new of an idea, we kind of have copied it from the US, there's a lot of jurisdictions, there where very clear objectives that have been set out in order to justify grid modernization, investments. So we think that it'd be beneficial for Ontario to do that, because then once you have those objectives in place, it is going to make it a lot easier to be able to prioritize grid modernization capabilities, functionalities, and investments in line with those objectives. You know, and then from there, you know, we're looking at creating a series of foundational investments. So going forward, some of the things that we think are foundational, are things like the distributed energy resource management systems and the advanced metering infrastructure, which is sort of like smart meters 2.0, for lack of a better term, and also the advanced distribution management systems. So we see those are going to be foundational pieces that all utilities are going to need to be able to help customers interact with the grid, and they're going to be necessary grid investments. So how what we see for those is we would like it to be similar policy direction, like we had for smart meters and green button, where you have government mandated activities. And then those are given, you know, a kind of lower standard of evidence with the Ontario Energy Board to support that capital infrastructure, they're deemed as priorities and ties back to that initial plan, where you set objectives, as long as those objectives can be that then those should get a pass through.

Trevor Freeman 48:12

If I could jump in right there just for our listeners. So what Teresa is describing here is, at the moment when there are unique things that are not part of government mandate, yet every LDC and Ontario, of which there are many 60, something I don't even have the number in front of me but every LDC when it comes time to enact that project has to go through a whole exercise of justifying it proving why it's necessary, saying this is why we want to do it. If there was some commonality across LDCs in the province, we wouldn't have to put as much effort into, you know, the report writing side of it, we could just get down to business and make these changes that we all know across the province are important. So I think it's helpful for us to understand how that process works.

Teresa Sarkesian 49:00

Yeah, and thank you for interjecting on that, Trevor, because if government wants us to move fast, we can, but we need that certainty. So you know, we're no different than any even though we're regulated monopolies. We're really no different than any other business that wants to do business in Ontario, you're always looking for certainty and clarity, from legislation from policy from regulation, because the uncertainty is what slows things down. Another recommendation that I'm moving forward with is that we need to move beyond pilot projects. I had a conversation with a consultant who is working with Enercan on this and they want to move beyond I love their term, death by demonstration. We've got a couple of dozen pilot projects currently in the sector, whether they're funded provincially through the IESO or they're funded federally through Natural Resources Canada, and you know, there's some very exciting results that are coming out of those. But some of those pilot projects have been going on for all almost four years, in one case, almost five. And at some point you need to pull off the band aid said, Yes, this is a success, all LDCs would be eligible for funding in this. So we need to be able to scale it up. Or we just say no, that's not going to work. But being in this constant state of the pilot projects, while it's informative, at some point, someone has to have the courage to say we're moving forward, this is going to be scalable. Another recommendation we have is to create an action plan to develop a comprehensive human resource strategy to address quantity quality, and partnership aspects of the labor force going forward. There's some great work that electricity, Human Resources Canada has done. And, you know, DC 28,000, replacement and new jobs in our sector, by 2050 and that's, the electricity sector at large across Canada. And I did some, I think back of the envelope calculations to try to figure out, okay, some assumptions about distribution. And we're looking at close to 10,000 new positions in the sector, over the next 25 years. Every sector is having challenges, filling current jobs, never mind jobs, that we're not even sure what they are quite yet. So we don't necessarily have the right programs at the universities and colleges or private training institutions to start getting the right people and talent into our organization. And, you know, so we need help for that. And, you know, I am encouraged, I saw a little announcement out of the province yesterday to have more electricians down on the Chatham Kent area, because that's the whole greenhouse industry. And so I said, Okay, that's exciting. So people are starting to pay attention, but we need it more than just in one local community, it needs to be province wide. And, you know, like I mentioned before, we need to have more conversations about what the funding models are going to be to fund the energy transition. So these are some of the issues and recommendations that we're taking forward from our vision paper. But day to day, I guess that's the other thing, I want to mention in terms, the change I've seen, I've never seen us work on so many issues, prepare so many submissions, invest so many staff at various tables and working groups. And we love doing all that work. We love representing our members at every table of discussion possible, but I've never seen so many. And they're not just oh, you're there for a month, and you're done. Some of these they are multi year. So they have longer legs, because they are far more complex. But you know, we're working every day, you know, for members that way. Very, very proud to represent our sector think it's a fantastic sector. And the fact that they're going to play such a pivotal role in the future makes us only want to work harder to make sure we get the best of everything for our membership.

Trevor Freeman 52:54

Yeah, I know, we echo that at our level, we can certainly see a lot more stakeholdering and engagement happening with all players in the sector, but especially the government as they figure out this energy transition to right, let's not, you know, let's not forget that the government needs to figure out where policy needs to go to lead it, and it's a great role that you're playing to kind of bring the voice of the distributors to the government. Because again, as we've talked about a couple of times, we're really on the front lines, and we're hearing from our customers, and we're seeing what needs to change right at that customer level, in order to enable some of this stuff that's happening so that that conversation between the LDCs and the government I think is really important. So you know, we don't work in a vacuum, I just mentioned a number of stakeholders in our sector. And I highlighted the interconnected nature of our grid at the beginning of our conversation. There are a lot of different players working together to really, at the end goal is bring power to the customer. How do you see the existing model changing or expanding in terms of, you know, the kinds of partnerships that LDCs have moving forward? So you know, you mentioned private equity is being a potential upcoming role. There are things like technology companies that are developing innovative solutions, who, you know, we maybe were a bit more arm's length with in the past. There's a changing nature of our relationship with the customers, you brought up the idea of going from one way power flow to kind of two way back and forth. arrangement. How do you see that partnership evolving in the future?

Teresa Sarkesian 54:30

Well, I think the good news is, there's a very strong foundation knowledge to build on. So I'm going to talk about three different areas. I'm going to talk about sort of shared services across utilities, and I'll talk about a partnerships with the private industry. And I'd like to talk about the engagement with customers as well. So firstly, there's lots of shared services going around in the industry already. There's all kinds of partnerships that members are trying to reduce costs for customers and find the best solution. So instead of saying, having 60 utilities run, seek out the best solution, you know, you get everyone working collaboratively to find a solution at the best price for customers. So we've seen a lot, just in my 15 years I've been there you've got in the past, there was, you know, common delivery of conservation programs, members work together on common engineering standards, lots of mutual aid assistance agreements across among utilities, for Storm Recovery. I've seen shared billing services, bulk purchasing products, and shared control room practices and services. And I've seen private sector play a much bigger role in utilities, as well. I've had the privilege to attend some openings, and launches of micro grids, where you have maybe a solar company and an energy storage, battery company, that are part of that group with utility, creating a micro grid for their community to provide maybe warming and cooling charging services when there's a major outage, for example. And I've seen now, some smart grids, you know, one that's already been implemented up in the north that has a significant private sector partner. And I've seen it also there's a new one, that's another one in the north, that's going to be developed with a private sector partner. And I've seen, not just Ontario businesses, I've seen what businesses come in one of our members is doing a distribution system operator pilot model with a partner in from Norway. So I'm really encouraged, I think the foundation is already there to kind of build on all those successes we already have, and do more, you know, and we talked about the customers going forward as well, that they're going to be to help playing a role, or we hope they're going to be playing a role. Because there's a lot of energy, battery storage and solar generation, sort of behind the meter, whether it's a farm, or it's a residential customer, or it's a big industrial customer. And so we want to be able to optimize all of those resources into the system to be of benefit to all customers to reduce costs. But we'd have to give an incentive to those customers to participate, no one is going to let you know a utility access their, you know, solar panel generation or their battery storage, unless they're going to be getting paid to do so. And I think that's going to be really important going forward, because we don't want to over build the grid, I mean, the grid is going to be so big, going forward. And we have to find ways to avoid over building it. Because we don't want to be in a situation where you know, customers are having to pay too much for a grid that's not properly optimized. So trying to find solutions behind the meter, that will maybe either avoid or delay bigger generation investments or transmission investments, or even actually distribution investments, we want to optimize that. But right now, there's not really a lot of permission to do that. So we need to get that legislative and regulatory permission to do that, to turn those, you know, more passive customers into prosumers, that they're basically your their proactive customers by selling their energy storage back to the grid. So I'm really optimistic. I think we've got a great foundation work to do on the customer peace, letting them participate as prosumers and the system, but I'm pretty optimistic that that we can get that job done.

Trevor Freeman 58:27

Yeah, I think it really highlights, there's a lot to be excited about when it comes to the change, that's going to happen. There's a lot of opportunity out there both for the LDCs, for the other stakeholders for our customers, that this energy transition, this change is going to bring about, you know, there's some challenges to I know, he talked about the challenges. I wonder, though, what do you see, as you know, one of the single biggest are a series of risks to achieving the vision that you've outlined in the paper, how could this go off the rails and not happen the way we need it to happen?

Teresa Sarkesian 59:03

Well, I always like to be glass half full as opposed to half empty, but you're taking me down that road? Trevor? So I'm going to answer that question.

Trevor Freeman 59:11

It's my job.

Teresa Sarkesian 59:11

So you know, obviously, our vision for the future role is big, but it's practical. The energy transition is upon us now. It's not something to contemplate for the future. So we think that the biggest risk is effectively inaction or kind of, you know, kicking the issue down the road, 510 years. We're seeing this right, nearby jurisdictions in the US are taking action. There's been significant funding out of the Biden administration, for all kinds of initiatives from you know, cybersecurity, to grid modernization down there. They're doing they're very competitive. They want to attract businesses, to the US. And so, you know, that's a major competition for Ontario. So if we don't seize the opportunities to kind of start working on these important issues now, we could lose economic development opportunities, we could lose jobs, we could lose investment, we could lose our talent as well, that may want to move to another jurisdiction. So to mitigate that risk, the LDCs, and policymakers have to work together on developing a shared vision around electrification and grid modernization, develop a plan of action and create a realistic timeline to turn that vision into reality.

Trevor Freeman 1:00:26

Yeah, it's a it's a great point. And I think it's important for people to understand that change is happening, the change is going to happen, whether we want it to or not. And, you know, often sometimes people say, Are we are we really going to see this change? I think we're already seeing it, we're already seeing customers want to change the way they interact with energy. The risk here is if we don't react quick enough or properly enough, the costs of that change becomes higher the reliability of the grid that we're working with, goes down, that general customer experience is not where it needs to be. And then you've highlighted some other ones, you know, we can really struggle with talent if we're not offering them the kind of cool innovative roles that they're looking for. But the neighboring jurisdiction is, so it's not so much that the change may or may not happen, it's how do we react to it in a way that really serves all of our stakeholder the best. So, Teresa, this has been a really great conversation. And I really appreciate you taking the time to join us and chat with us today. I think there's a number of things that we talked about today that really set up future conversations I'm going to have nicely. So thanks for the half for teeing that up. And this is your second time on the show. No doubt, there'll be a third time because I think there's a lot more that down the road, we can we can pick apart. So thanks for that. We typically end our interviews here with some common questions to all our guests. So to start off, what is a book that you've read that you think everybody should read?

Teresa Sarkesian 1:01:56

So one I recently enjoyed it's by a friend too. By Darrell Bricker, he wrote Empty Planet, and that is very, very good talks about actually declining global population. And what that means from everything from, you know, businesses to climate change to pension plans. So it's a fascinating read. People have time for it.

Trevor Freeman 1:02:19

Yeah, very cool. I'll check that out. So kind of the same question. What's a movie or a show that you'd recommend to everybody?

Teresa Sarkesian 1:02:24

I watched one a few months ago was a Netflix series called the Blue Zone. And it was an investigation on people who had made it to 100 I think they called Central Jamarion’s I can't remember the name. But basically, they interviewed all these people living around the world about what it takes to get to be 100. So I really enjoyed it. It was just, it was just very beautifully done. And the people they talked to, I found fascinating and so interesting. So I really enjoyed it.

Trevor Freeman 1:02:52

Yeah, I also watched that one that was really great. If somebody offered you a free round trip flight anywhere in the world, where would you go?

Teresa Sarkesian 1:03:00

Well, I couldn't pick just one place, Trevor. So maybe I could like, have like around the world trip. But Sydney and Tokyo are places I really want to go to

Trevor Freeman 1:03:09

Have you been there before?

Teresa Sarkesian 1:03:11

No, no, but I think they look like places. Totally,

Trevor Freeman 1:03:16

Totally. Who is someone that you admire?

Teresa Sarkesian 1:03:18

for years it has been Terry Fox, great. My kids are in a big, I don't want to say Terry Fox phase, but they obviously they learn about Terry Fox a lot at school. And so they often will come home talking about Terry Fox, and we've got a little book that we read about, you know, the story.

That's fantastic that he really is an exemplary Canadian. And if he can only know today, what he has achieved, you know, even though his it wasn't able to make his run across the country, because unfortunately, he passed I think he'd be blown away by the fact that people have kept the memory going. And you even talking about your kids, you know, obviously doing things to support his memory, and his initiatives. And he's just extraordinary to me.

Trevor Freeman 1:04:04

Now, there's definitely a lesson there. And we don't always know the impact that we are having. And we may never know the impact that we're having. long as we're kind of aiming at the right things. Good things will happen. So finally, to wrap it all up, what's something about the energy sector or its future that you're particularly excited about?

Teresa Sarkesian 1:04:23

Firstly, excited about everything. But if I had to sort of pick one, I am very excited about the potential for customers to be pro sellers and engage with the with the energy system. I think that could be absolutely transformative going forward. So I'm excited. And I hope to see that before I retire, that's for sure.

Trevor Freeman 1:04:45

For sure. I mean, I think there's no question. We're going to see lots of change, as we've talked about a lot today. And I'm excited about that, too. So that's great. Teresa, thank you again for coming on the show. I really appreciate it and it's been great chatting.

Teresa Sarkesian 1:04:57

Likewise, thanks so much, Trevor. Really enjoyed Our time together.

Trevor Freeman 1:05:00

Right Take care. Thanks for tuning in to another episode of he thinkenergy podcast. Don't forget to subscribe wherever you listen to podcasts and it would be great if you could leave us a review. It really helps us spread the word. As always, we would love to hear from you. Whether it's feedback, comments, or an idea for a show or guests. You can always reach us at [email protected]