Item - 2022.EX34.9

The Executive Committee recommends that:

Regulated Electricity Distribution

1. City Council, on behalf of the City of Toronto as shareholder, request Toronto Hydro to include in the publicly available portion of its annual report to the City of Toronto the status of the provincially regulated expanded grid capacity for growth, electrification and incremental local renewable generation in relation to helping the City of Toronto achieve its TransformTO: Net Zero Strategy goals.

Climate Advisory Services

2. City Council, on behalf of the City of Toronto as shareholder, request Toronto Hydro to expand its business activities beyond electricity distribution services by establishing a new stream of non-rate regulated operations within its regulated business, specifically Climate Advisory Services (the climate action opportunity that excludes Toronto Hydro owning and operating assets), in keeping with the proposal set out in Toronto Hydro's Climate Action Plan received by City Council at its meeting on December 2021 and the Toronto Hydro Climate Action Plan Status Report.

3. City Council direct the City Manager and Toronto Hydro, on behalf of the City of Toronto as shareholder, to negotiate terms and create a Memorandum of Understanding, in a form satisfactory to the City Solicitor, related to Toronto Hydro's Climate Advisory Services - including communications and marketing to customers, alignment of key performance indicators, implementation timelines and progress reporting -- to ensure that the implementation of Climate Advisory Services and TransformTO are coordinated and provide value-for-money, in relation to any future impacts on the Toronto Hydro dividend to the City, and report back to City Council on the Memorandum of Understanding in the second quarter of 2023.

4. City Council request Toronto Hydro to develop targets for the Climate Advisory Services including, but not limited to, installation of heat pumps, solar panels and Electric Vehicle chargers, prior to signing of the memorandum of understanding between the City of Toronto and Toronto Hydro.

5. City Council, on behalf of the City of Toronto as shareholder, request Toronto Hydro to deliver publicly to the Executive Committee through the City Manager, the Chief Financial Officer and Treasurer, and the Deputy City Manager, Corporate Services, an annual report on the progress, key performance indicators, and next steps of Climate Advisory Services.

Climate Capital Investments: Street Lighting

6. City Council confirm its support in principal for proceeding with City-wide LED street and expressway light conversion, including the related enabling infrastructure investments. 

7. City Council request the General Manager, Transportation Services, in consultation with the Chief Financial Officer and Treasurer, and in consultation with Toronto Hydro, develop implementation options for the City-wide LED street and expressway light conversion including applicable budget, and report back with a recommendation by the end of the second quarter of 2023.

8. City Council authorize the City Solicitor to sign an amendment to the existing retainer agreement with Stikeman Elliott LLP (Purchase Order No. 6042019) for legal advice and support to negotiate amendments that may be necessary to the 2006 Street and Expressway Lighting Service Agreement between the City and Toronto Hydro Energy Services Inc. for LED conversion and other related matters under this agreement, increasing the current upset value of the retainer by $475,000 so that it increases from a total $305,000 (excluding HST) to $780,000 (excluding HST), for a term that expires when the services are completed.

Climate Capital Investments: Other

9. City Council direct the Executive Director, Environment and Energy to continue to investigate with Toronto Hydro on other possible Climate Capital Investment opportunities (whereby Toronto Hydro owns and operates climate action assets such as EV chargers) to implement Transform TO: Net Zero goals.

Confidential Attachment

10. City Council direct that Confidential Attachment 1 to the report (June 28, 2022) from the City Manager remain confidential in its entirety, in accordance with Section 4.4 of the Toronto Hydro Shareholder Direction, as it contains technical, commercial, financial or labour relations information of Toronto Hydro Corporation.

At City Council's request at its December 15, 2021 meeting, City staff and Toronto Hydro Corporation have continued a collaborative analysis of the Toronto Hydro Climate Action Plan and relevant City strategies and programs to determine specific goals, outcomes, actions and timelines for enabling Toronto’s net zero climate targets.

This report responds to further Council direction that the City Manager report to City Council on the results of this analysis and any recommendations regarding new climate action mandates such as a shareholder direction for Toronto Hydro. In support of this request, as well as other requests of Toronto Hydro made at the December 2021 Council meeting, Toronto Hydro has prepared a Status Report on their Climate Action Plan (CAP), included here as an Attachment.

City staff will continue to work with Toronto Hydro on implementation of the CAP subject to the requested City Council mandates. The opportunities identified for near-term implementation are:

- Climate Advisory Services (CAS), a new unregulated business focused on supporting customer adoption of low carbon technologies; and

- Climate Capital Investments, with the immediate focus on conversion of streetlights to LEDs, subject to the development of an implementation plan by City staff, in consultation with Toronto Hydro. 

Toronto Hydro estimates that annual CAS operating costs will rise from approximately $8 million to $15 million from 2023 to 2026. Toronto Hydro proposes to fund CAS from revenues and net income within their regulated electricity distribution business, and operating budget would be allocated through their typical budgeting process.

Toronto Hydro also estimates that LED conversion of street and expressway lighting will require a capital investment of approximately $180 million. Technology options, timeline, budget and funding sources for the conversion will be addressed in an implementation plan being developed by Transportation Services in consultation with Toronto Hydro. 

City staff and Toronto Hydro agree that any expansion of electricity distribution is generally a matter of Provincial/Ontario Energy Board regulatory jurisdiction, therefore no mandate related to an expansion of electricity distribution is being sought in this report. As the City of Toronto continues work on implementation of TransformTO, including through engagement with the Climate Advisory Group and the Joint TransformTO Implementation Committee, it will provide inputs to help inform Toronto Hydro electricity demand growth scenarios.

The City and Toronto Hydro will also continue to coordinate and collaborate on implementation and to identify short, medium, and longer-term actions.