The Ontario Energy Board’s chair, Rosemarie Leclair, presented a speech to the annual meeting of the Electrical Distributors Association on March 26, 2012. Her comments amplify concerns I have previously raised about Ms. Leclair’s apparent bias against consumers.
For those new to the Ontario Electricity Regulation Crisis Report, the purpose of this series has been to report on regulatory developments at Toronto Hydro arising from a decision of the Ontario Energy Board on January 5, 2012. Here is a brief summary of developments. In a nutshell, my thesis is that Toronto Hydro management under the leadership of CEO Anthony Haines planned and then pursued a regulatory crisis. I believe that Haines took his initiative at this time because the Ontario Energy Board has been weakened by the Ontario government’s negligent appointments practices.
Until about a year ago, Ms. Leclair was a member of the Electrical Distributor’s Association board of directors and chair of Hydro Ottawa. Having so recently moved over to lead their regulator, you might expect that Ms. Leclair would be cautious in presenting to her former peers. Instead, Ms. Leclair’s latest speech makes several comments that cast doubt on her ability to fairly consider concerns about utility inefficiency and excessive rates.
Ignoring evidence of vast differences in the efficiency between similar distributors within the province, Leclair sounded more like a trade association representative than a regulator, declaring that they were all efficient. To emphasize the point, she declared that the “story” of universal efficiency of distributors “sometimes gets lost” in “our sector”.
“Not only have you delivered electricity service safely and reliably, but you have done so efficiently as well. That’s a story that sometimes gets lost. But I think it’s an important point to remember as we continue to work towards greater efficiency in our sector.”
Leclair expressed comfort with the current level of rates. Instead of challenging Ontario’s outlier rate trend, she focused on managing public concerns using amplified communications strategies to tell the “a good story”.
“The reality is consumers are (original emphasis) getting good value from electricity investments. In Ontario, we have enjoyed reliable service at a reasonable cost for many decades.
We have a good story to tell, and we need to get that message out…”
Ms. Leclair’s assessment of the value of electricity is faithful only to the current government’s perspective. Relative to the consumers in the U.S., Ontario consumers are getting very poor and declining value from electricity. U.S. government’s Energy Information Administration in its most recent Annual Energy Outlook forecasts that the average residential price for electricity in the United States will be almost flat in inflation-adjusted terms for many years, reaching 12.4 (US) cents/kWh in 2016 in nominal dollars. Ontario’s residential average now is about 16 (CND) cents/kWh. Aegent Energy recently prepared an electricity price forecast. For residential consumers in 2016, Aegent forecasts a price of 21.9 (CND) cents/kWh in nominal dollars. Using these figures and assuming currency parity, Ontario consumers who for a century paid substantially lower electricity prices than the U.S. average, will be paying rates 77% higher than the U.S. average.
Ms. Leclair’s vision is not for the regulator to be independent but for the regulator to collaborate with the licensees in pushing the government’s messaging. The regulators and the regulated are the new “we”.
“We need to work together to look at how to better engage the customer around the value of electricity, how to tell the electricity story, and how to better present the information on the electricity bill…
Some of that work is already underway. We look forward to continuing to work with you to improve and better coordinate communications with customers across the sector, to ensure that the message is effective, informative and consistent with the right information coming from the right source at the right time.”
Ms. Leclair highlighted efforts to meet privately with leaders of regulated utilities.
“In the past year, I’ve visited many LDCs (Local Distribution Companies) and met with more than 40 utility CEOs across the province on an individual basis. For those of you I have not yet met with, I’ll be resuming these “road trips” this spring.”
Ms. Leclair also indicated her intention to develop stakeholder committees that will consult directly with her instead of with the full board. She emphasized her intention to move away from the tradition of regulators receiving and deciding applications.
“To help facilitate this ongoing dialogue, I am pleased to announce that I will be establishing both an industry and a consumer advisory group. The “˜Chair’s Advisory Roundtables’ will be made up of executives from across the energy industry representing different regional, stakeholder, consumer and sector interests who will be invited to share their insights and expertise with the Chair on matters of interest to the Board so that we can continue to be a knowledgeable forward looking and proactive regulator.”
Ignoring the ongoing crisis at Toronto Hydro, including its proposed distribution rate increase of about 40% for households and its threat to public safety, she concludes that all is well in the electricity distribution sector in Ontario.
“”¦you should all be very proud of the work that you do to deliver electricity…”
“”¦ there is no question that you always have your customers’ interests at heart.”
The tight alignment between Leclair and her former peers among the electricity distributors was also evident in her concluding remarks at the “Renewed Regulatory Framework for Electricity Stakeholder Conference” on March 30, 2012
“I think the utilities’ perspective is very much that perspective is something that works for my customer base, whatever that customer base is, and for the broader intervenor community and the Board, as well. It is what works for the consumer and the consumer interests, and those things are not different.” (p. 104)
Ms. Leclaire’s audience at the Electrical Distributor’s Association event would have immediately understood her remarks to indicate that their regulator, far from acting independently, was taking a lead in justifying government actions. For example, bill presentment is governed by Ontario Regulation 275/04 passed by the McGuinty government. Now the new chair of the regulator is directing the industry to support her initiative to explain the government-determined bill presentment.
“The Minister spoke specifically about the need to improve the electricity bill, to convey information to people in a way that they want to receive it, and in a meaningful way that gives them tools to manage their energy use.
We need to work together to look at how to better engage the customer around the value of electricity, how to tell the electricity story, and how to better present the information on the electricity bill.”
Overwhelmingly, the power bill that licensees send out and you that pay reflects current and previous government-direct investment choices, often made by government-owned agencies. Now the new chair of the regulator is directing the industry to support her initiative to explain the rate level, which will next year be the highest of any state or province in North America with the possible exception of Prince Edward Island.
For the Ontario Energy Board to direct licensees through their trade association to collaborate in a project of communicating the “story” of government’s electricity choices, indicates that the independent adjudicative function of electric utility regulation in Ontario is over.
Leclair’s direction contradicts key elements of the Board’s legal mandate. Section 1 of the Ontario Energy Board’s mandating legislation provides the purposes of the Board related to electricity. Here is that passage from the legislation:
The Board, in carrying out its responsibilities under this or any other Act in relation to electricity, shall be guided by the following objectives:
1. To protect the interests of consumers with respect to prices and the adequacy, reliability and quality of electricity service.
2. To promote economic efficiency and cost effectiveness in the generation, transmission, distribution, sale and demand management of electricity and to facilitate the maintenance of a financially viable electricity industry.
3. To promote electricity conservation and demand management in a manner consistent with the policies of the Government of Ontario, including having regard to the consumer’s economic circumstances.
4. To facilitate the implementation of a smart grid in Ontario.
5. To promote the use and generation of electricity from renewable energy sources in a manner consistent with the policies of the Government of Ontario, including the timely expansion or reinforcement of transmission systems and distribution systems to accommodate the connection of renewable energy generation facilities. 2004, c. 23, Sched. B, s. 1; 2009, c. 12, Sched. D, s. 1.
Leclair’s speech contains directions that contradict the first four of the Ontario Energy Board’s objectives. Rather than protecting consumers, she promotes government/industry/regulatory coordination to facilitate Ontario’s ascension to #1 rates in North America. Her presentation lifts not a finger to address the gross economic inefficiency that is driving this disaster. Low income consumers and high electricity using employers are being forced into darkness. Under the banner of “smart grid”, Ontario is allocating grid resources away from projects that would enhance reliability and instead directing those resources to projects that weaken the economic and technical functionality of our power system.
The only element of the Ontario Energy Board’s legal objectives that Leclair is faithful to is its duty of obedience to governmental whim.
There is a “story” to tell the public about Ontario’s electricity situation. However, to tell that story factually, the Ontario Energy Board must function independently from government.
The responsibilities of the Ontario Energy Board extend beyond electricity distributor rates into areas including payment amounts for OPG, facilities approvals, transmission rates, gas utility regulation and other matters. Consider the perspective of, for example, a citizen who has a concern about a proposed facility before the board for approval where the facility is part of the government’s policy agenda. Any fairness concerns that relate to the chair’s approach to electricity distributors should raise concerns about fairness in the discharge of the Board’s other responsibilities.
If there were any non-oblivious people in the audience, their faces must have been red. It is pretty clear that this woman has no idea what her role is supposed to be, and that Ontario utilities can expect that she will do their bidding without the commensurate expense of having to bribe her. It is no wonder that McGuinty picked her as his electricity P.R. point person, but very brazen of him to think that nobody will notice how unseemly this all is. The natural gas companies must be scratching their heads at all this, and wondering if it is safe to partner up with her. It seems too good to be true for a “regulated” company, doesn’t it ?
I was at the March 30 session. Her customer-focused comments sounded like lip service to me. I kept my head down (out of respect to my clients) but was sorely tempted to ask, “Why are we ignoring the 900 pound gorilla in the room — the renewable energy increase that will dwarf everything else ?”. Two other things … I understand she has a hard-on for Willing/ness to Pay or WTP … apparently a concept now popular in Scandinavian energy that’s worthy of more research … and she struck me as someone who could, in the face of just mild provocation, get belligerent pretty quickly.