Ontario’s electricity system will slip further into farce with fake price-regulation hearings

 By continually politicizing electricity, the current Ontario government has lost its way.

This article, by Andrew Roman, was published by the National Post

Electricity regulators normally make rate-setting decisions through an adversarial public hearing process. The Ontario Energy Board (OEB) has recently been proposing that it should itself appoint some sort of consumer advocate to represent consumers at its hearings, while precluding the participation of some of the current parties. In substance, the OEB is proposing to replace some of the current consumer advocates with a proxy advocate subject to its own control, and then considering the result of this substitution to be a genuine adversarial proceeding.

The OEB’s regulatory process has been legislated for at least four decades. It is supposed to be the normal public hearing process commonly found throughout the U.S. and Canada. A public hearing process is by definition an adversarial process: an industry participant seeking higher rates and those who would pay those rates seeking to reduce or eliminate the rate request. An adversarial process requires at least two (and usually more) genuine adversaries.

If the decision-maker itself appoints — and thus can control or influence — one of the key parties, then the adversarial process is no longer open and transparent. It is one where the adjudicator can tell a “party,” behind closed doors, what to advocate or what not to advocate. If the OEB appoints a lawyer as the consumer advocate, the OEB would be that lawyer’s client. Such an advocate would actually represent no one, and thus would have no legitimacy. This whole hearing process could therefore be called a fake hearing. Such hearings are subject to the risk that any affected consumer group denied the right to participate in the public hearing could bring a judicial-review application to set aside the process and the resulting decision.

This whole hearing process could therefore be called a fake hearing

If the OEB wishes to restrict representative public participation in public hearings, the more legitimate approach would be to stop holding so-called public hearings altogether. The OEB could then close its doors to the public and issue its decisions from behind closed doors. There is no room in a democratic society, where government is subject to the rule of law, for a government agency to conduct counterfeit public hearings.

However, the current Ontario government has recently amended its electricity legislation to take away much of what was left of the OEB’s ratemaking independence. Therefore, the honest approach for the Ontario government would be to close the OEB entirely. If the OEB cannot make rate decisions at arm’s length from government, via a genuine adversarial-hearing process, how can that serves the public policy purpose of transparency and accountability? Transfer its key staff into the ministry and let the decision be seen for what it is increasingly becoming: a political decision, informed by some modest bureaucratic review. That way the minister couldn’t blame or hide behind the OEB for escalating electricity prices.

The current Ontario government has lost its way

By continually and increasingly politicizing electricity supply, generation mix and pricing, the current Ontario government has lost its way. Unfortunately, there are no better policy proposals from any opposition parties, all of which have forgotten why it was necessary to have created the OEB in the first place. All of them seem to believe that the right electricity price is the one that will make that party popular in the next election, regardless of economic realities.

A key difference between Ontario and nearby U.S. jurisdictions to which it is losing industry as Ontario electricity rates rise to uncompetitive levels is public ownership of the monopolies providing most of Ontario’s electricity. As Ontario moved from largely independent, OEB-regulated electricity pricing to now essentially politically directed pricing by publicly owned monopolies, Ontario’s competitive situation has deteriorated. Eventually this will affect Ontario’s public finances. The Trump administration’s revisions to NAFTA and its “America First” policy will make Ontario’s competitive situation even worse.

Despite these risks, the Ontario government is giving electricity users a lower electricity price as a political decision. How can it practically do this? Governments can legislate a lower price, but they cannot legislate a lower cost of producing it. The costs remain what they are. The political miracle of lower prices is only accomplished by transferring today’s consumer costs to the consumers of tomorrow, at higher future cost than if they were paid today. What does the Ontario government have against our children?

Andrew Roman, a director of the Energy Probe Research Foundation, has been a regulatory lawyer in Ontario for more than 40 years.

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