Ontario’s desire for total control over all aspects of the electricity sector is nearly fulfilled.
The push to eliminate dissent and independent review of the province’s energy monopolies has been a decade in the making. Since 2004, many of the province’s largest and most expensive policies were implemented with little to no oversight – at great cost to ratepayers, as the Auditor General forcefully highlighted in her recent annual report.
But Queen’s Park is set to fully take over all decision-making regarding the province’s energy monopolies by solidifying its control over the province’s energy regulator, the Ontario Energy Board (OEB), with the recent passing of Bill 112. In doing so, Ontario is shutting down the last arena of independent public review of the billions of dollars being spent by the province and its many publicly owned utilities.
The legislation, “Strengthening Consumer Protection and Electricity System Oversight Act,” would deny independent intervenors the funds needed to hire the lawyers and experts needed at these hearings, effectively blocking their participation.
Prior to this legislation, any individual ratepayer or organization representing ratepayers – ranging from big, industrial groups to cottage associations or low-income organizations – could apply for funding and act as an intervenor in any rate application. The government would instead replace the independent intervenors with a new government-appointed consumer representative.
In other jurisdictions where this has occurred, the direct cost of this new bureaucracy has been far more expensive than the cost of reimbursing intervenors for their lawyers and consultants. The indirect costs of losing the ability to hold the utility monopolies to account by forcing them to justify their proposed rate increases before the OEB could be much greater still.
One study found that intervenors have been highly successful at paring back the monopolies’ rate requests, their lawyers and consultants costing ratepayers just 2 cents annually while helping to reduce rate increases by $28 per customer. Other studies found that intervenors account for 1 per cent or less of overall regulatory costs, which themselves are a small amount of total electricity costs borne by ratepayers.
Replacing these groups with a government-appointed consumer representative charged with questioning government-owned monopolies eliminates the last remaining voice of independent review of proposals by public monopolies to spend billions of dollars on capital projects.
The province’s new legislation also ensures that any new transmission line can be deemed a “priority project” by the ministry of energy and automatically approved by the OEB. In the past, the OEB would analyze such projects to determine whether they were necessary or cost-effective. Furthermore, the province is considering more legislation that will exempt all government-directed energy plans or projects to be exempt from the Environmental Assessment Act.
The province’s previous moves to sidestep independent review have been costly for ratepayers. The smart meter rollout – which cost ratepayers $2 billion and counting and still isn’t fully functional – was done without any review from the OEB or other regulators. Billions of dollars in contracts have been – and continue to be – given to renewable energy and natural gas generators without any review by the OEB or intervenors. And the long-term energy plans developed by the province’s own energy planning experts – the Ontario Power Authority (OPA) – were never implemented and, instead, were replaced with plans written by the ministry of energy that were, again, never fully reviewed at the OEB and were later criticized by the Auditor General as overly expensive.
More recently, the province collapsed the OPA into another energy agency, the Independent Electricity System Operator (IESO), which is in charge of operating the province’s wholesale electricity market, ensuring that even more political control is embedded in ever more parts of the electricity sector. There is no longer anything “independent” about the Independent Electricity System Operator.
In the end, the OEB and the intervenors were the last voice of criticism that wasn’t on the payroll of the province. By replacing them with a government-led consumer advocate, the province will control every step of decision-making on electricity policy and spending, those pesky checks and balances eliminated at last.
Brady Yauch is an economist and Executive Director of the Consumer Policy Institute (CPI). He has acted as an intervenor at the OEB.
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