A long-range plan is needed now
By Financial Post, Jan Carr, OPA
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In 2004, the government decided that long-range investment in electricity supply and conservation required an integrated plan to ensure coordinated development of reliable and sustainable electricity service. Such central planning had been abandoned by legislation passed in 1998 which dismantled a century-old monopoly structure through the introduction of competition and customer choice in the electricity sector.
While the monopoly structure provided impeccable service, it suffered from being inflexible and while the competitive structure was infinitely flexible, it suffered from inadequate investment and therefore declining reliability. The 2004 innovation was a hybrid structure which re-introduced central planning to establish long-range direction while leaving shorter term operational decisions to competitive forces. It promises to deliver the balance needed in ensuring this essential service is managed in a prudent and sustainable fashion.
But the midstream halt of the review process indicates that we have more work to do on how we ensure that the long-range plan is prudent and responsive to what customers and society at large wants. The arrangement, at the moment, involves checks and balances set up in law between two public-purpose agencies. One, the OPA, is required to prepare the plan and the other, the OEB, to review it for compliance with government policy and economic prudence.
The arrangement made use of the existing regulatory structure employed by many regulatory agencies throughout Canada in overseeing such things as electricity and natural gas rates. It is an arrangement designed to ensure that complex decisions about essential public services are made transparently and objectively — that is, without political involvement.
But planning and reviewing in an open and transparent fashion can be a time-consuming process — in this case some 30 months. OPA took a little over 12 months to prepare the plan and the OEB was expected to take about 18 months for its review.
The process was stopped about six months before the end of its inaugural run by the government issuing a legally binding directive to the OPA to reconsider certain planning aspects due to changed circumstances since planning was initiated. There is no faulting the logic that conditions had changed, but what is clearly faulty is the approval process. Prescribed by government in the first place, it has proved to be too lengthy for the pace of modern life as well as the patience of the public and its government.
Why are regulatory processes so long and how can they be shortened while at the same time meeting the review objectives? In the case of OntarioÂ’s electricity plan, one has to question how much scrutiny is enough.
In preparing the plan, the OPA interacted with well over 2,500 individuals and organizations through face-to-face meetings, seminars, workshops, conference calls and internet-based discussions. Seventy-seven individuals and organizations registered officially as intervenors in the OEB review process, most if not all of whom had already participated in as many of the OPAÂ’s sessions as they wished.
The volume of opinion and input can be gauged by the forest of paper involved. The OPA filed 7,500 pages of evidence with the OEB, half of which documented the plan, with the balance being the submissions of stakeholders and explanations of how their input had been addressed. A further 6,000 pages of questions and answers were then generated by stakeholders and the OPA during the run-up to the start of the hearing. A further 8,000 pages of transcripts would likely have resulted had the hearing run to completion.
Clearly it may be time to reconsider the cost-benefit balance as reflected in the duration-transparency balance. How much transparency is enough? Does the 80-20 rule apply here — 80% of the benefit can be had for the first 20% of the effort? What are the alternatives for improvement?
Many have questioned the need for one public-purpose body to examine the work of another which basically says “skip the formal regulatory review.” Others have questioned the effectiveness of the court-like approach which is at the heart of a formal regulatory review. Law court processes were developed originally to deal with important, but nonetheless simple, yes-no decisions and they become decreasingly effective as the decisions required become more complex and nuanced. They also become decreasingly effective as the number of parties arguing the case increases.
Another potential improvement to regulatory processes pointed out by many is to tighten up the practice of paying fees to intervenors since such fees create a perverse incentive to prolong the proceeding and attract what amount to professional intervenors. The OEB pays intervenor costs to ensure inclusivity. In contrast the National Energy Board does not and has been criticized by consumer groups as a result.
A middle of the road approach has been adopted by the BC Utilities Commission which pays costs only to those with no other reasonable source of income and who have a substantial interest in a substantial matter. This practice normally results in customers of the service being regulated being the only recipients of intervenor funding.
At stake here is ensuring that electricity customers are provided with service which is reliable, sustainable and affordable, in other words, ensuring that the official plan is in the public interest. This boils down to approval either by elected representatives or a public agency using a process which is transparent and objective. If we canÂ’t find a better balance between transparency and speed than our present regulatory processes provide, we will be stuck with government as the approver. And that wonÂ’t guarantee either transparency or objectivity, let alone speed.
