As if the Ontario government was trying to find ways to privatize Hydro One as harmfully to the public interest as possible, the government has decided to link the Ontario Energy Board directly to the senior executive group at Hydro One.
See the May 22 email from OEB Chair Rosemarie Leclair, appended below, announcing new appointments to the board.
Ms. Leclair’s announcement appears to have been forced by her disclosure during her comments before the Ontario Legislature’s Standing Committee on Finance and Economic Affair on May 20 of some of the new appointments in response to particularly pointed cross-examination by NDP MPP Peter Tabuns.
A rotating door has increasingly linked the OEB with the regulated power sector since Rosemarie Leclair made the leap directly from her position as president and CEO of Hydro Ottawa to chair the OEB in April 2011. In 2012, Leclair supervised the rotating door transfer of an active OEB member, Paul Sommerville, to become the Chief Regulatory Officer at Toronto Hydro. It appears that Sommerville was negotiating his new employment terms at the utility while actively deciding on regulatory cases.
The latest rotating door transfer shifts Hydro One’s just-retired VP and Chief Regulatory Officer Susan Frank to the OEB.
For any trusting souls left in Ontario who had confidence in the assurances of Premier Wynne, Minister Chiarelli, and their adviser Ed Clark that consumers are being protected in the Hydro One deal, this latest cross-appointment linking the regulator and regulatee should be the last straw.
The new OEB-Hydro One cross-appointment is the latest sickening twist in the government’s Hydro One privatization scheme. The core of that scheme is to use the sale to grab $4 billion from electricity consumers to spend on non-electricity spending sprees. The missing $4 billion will add to the already backbreaking burden of government/ratepayer backed debt piling up in Ontario’s power system.
Another element of the new regulatory appointments that signals the government’s preference for a weak regulator obedient to government orders is the continued shift of OEB appointments toward part-timers, away from full-time regulators. Part-timers depend on work orders from the chair for their income whereas full-timers are compensated on an annual basis and are in a position to more closely monitor internal board administration. I have discussed this retrograde trend previous in my “Ontario Electricity Regulation Crisis Report” including here, here and here.
Despite being in the big chair for over four years, Ms. Leclair is noticeably confused about her direct responsibilities. During her comments to the Finance Committee, she attempted to argue that ratepayers are well protected by virtue of the active participation of consumer representative organizations. At a speech to the Ontario Power Summit on May 12, Minister Chiarelli indicated that the government is contemplating moving away from independent consumer representation to a model whereby the government selects and funds (and therefore controls) an approved consumer representative at the OEB. Lobbed a softball by Liberal MPP Yvan Baker on the Finance Committee inviting examples of the consumer organizations she relied upon, the examples Ms. Leclair provided were:
“Regular interveners in our processes are interveners like the Council of Canadians, which represents consumers; Low-Income Energy Assistance, which represents consumers, vulnerable energy consumers””so significant, significant representation.”
There has never been an intervenor at the OEB called “Low Income Energy Assistance”. Perhaps Ms. Leclair was thinking of the Low Income Energy Network (LIEN). LIEN appears to receive no financial support from the people it claims to represent. LIEN was initially funded by the Ontario government’s Trillium Fund and is now funded by Legal Aid Ontario. LIEN has no record of involvement in addressing factors increasing the overall cost of power in Ontario, but instead focuses on advocating subsidies for low income consumers. LIEN often issues press releases lauding the government.
The Council of Canadians have participated in some pipeline applications associated with the OEB to oppose measures that would enhance access to fossil fuels but have not been involved in any utility rate applications related to the overall cost of energy.
There are several consumer groups active that the OEB attacking some of the root causes of energy costs, but Ms. Leclair doesn’t seem focused on that.
Ms. Leclair claimed to the Finance Committee that Hydro One’s residential distribution rates have increased 1.4% per year since 2008. Wrong again. The rate of Hydro One’s residential increases has been more than double that pace since 2008.
One fact that Ms. Leclair accurately stated relates to governance of the board. When questioned by PC MPP Monte McNaughton about why the Board has been operating without a statutorily required second vice chair, she correctly noted that the government’s practice of ignoring the law on this point preceded her tenure. This statement is true but hardly reassuring. One might hope that the head of such an important institution would use her opportunity at the Standing Committee hearing to advocate for compliance with the law, but Ms. Leclair never publicly expressed any inclination in that direction during her term as chair.
Maybe the government thinks that having a clueless, non-independent, and conflicted regulator will encourage bidders to believe they can cash in by buying pieces of Hydro One. Maybe Minister Chiarelli — who believes that Ontario’s power exports are profitable, that OPG’s profits are funding schools and hospitals, that conservation programs are saving you money, and that the power system runs on pixie dust — thinks that Rosemarie Leclair is competent. Given Minister Chiarelli’s utter contempt for the OEB Act — failing for years to comply with its requirements for regularly updated MOUs between the Board and the government, and failure to maintain the statutorily required complement of vice chairs, management board, and COO — it is clear that he is only interested in using the OEB as a pressure relief valve for mollifying consumer concerns about having to pay for his government’s wasteful policies.
Premier Wynne’s sale of Hydro One will produce higher rates to pay back the $4 billion her government is about to sneak off with. But that rate increase is in the future. As of last week, Wynne’s Hydro One sale plan has already further impaired Ontario’s once respected tradition of effective, independent, and expert public utility regulation.
From: Employee Communications
Sent: May 22, 2015 3:58 PM
Subject: New Board Member Appointments
Sent on behalf of Rosemarie T. Leclair, Chair & Chief Executive Officer
Over the past several months we’ve been working to strengthen the Board to ensure we are well positioned and have the capacity to manage the ambitious regulatory agenda that is before us.
To that end, I am pleased to advise you that Cabinet has approved Ken Quesnelle’s renewal as Vice Chair for the next three years.
I am also pleased to inform you that a second Vice Chair and four new Board members have been nominated. These appointments are now subject to review by the Standing Committee on Government Agencies.
Marika Hare has been nominated as Vice Chair. As you know, Marika brings a wealth of regulatory and adjudicative experience to the Board and will be a welcome addition to our Management Committee.
In addition, the following Board member nominees will bring a diversity of experience that will add to the Board’s expertise:
· Victoria Christie, part-time member
Victoria has a Master in Economics and over 20 years’ experience in the electricity sector. She worked as an advisor at BC Hydro on energy efficiency, external relations and fisheries-related issues in the Power Smart Program, as well as set standards and guidelines and conducted economic, financial and design reviews of energy efficiency and conservation programs. From 2002- 2010 Victoria was a senior advisor in Generation and Environmental Affairs at the Canadian Electricity Association. Her environmental and economic expertise will be an asset to the Board.
· Susan Frank, part-time member
Susan has a Master of Business Administration in Finance and Economics and has been a Chartered Financial Analyst since 1980. Susan was Vice President and Chief Regulatory Officer at Hydro One where she has worked to develop the long term regulatory strategy and improve relationships with external utility stakeholder including the OEB and the ministries of energy and finance. She has extensive experience with the OEB and we look forward to her joining the Board.
· Paul Pastirik, part-time member
Paul has a Master of Business Administration from the University of Ottawa and became a Chartered Professional Accountant in 1982. Paul has the business/finance background that we have been seeking as well as experience in the energy sector. Paul began his career as a senior Petroleum Economist with Energy, Mines and Resources Canada before moving to Union Gas where he had roles in Regulatory Affairs and Financial Planning and Reporting. He left in 1998 to join Aecon as Vice President, Finance and Utilities Division. Before retiring in 2014 Paul was Senior Vice President, Finance Aecon Group Inc. responsible for all financial matters supporting the entire operation.
· Peter Thompson, part-time member
Peter is currently counsel with Borden Ladner Gervais LLP in the Ottawa Regional Office. He has been a partner at BLG and Scott and Aylen since 1969. Throughout his career Peter has acted as an advocate in Court and Administrative proceedings for a diverse group of clients. He has 40 years’ experience representing client interests in proceedings before the OEB, and is consistently ranked as one of Canada’s leading energy regulatory lawyers.
While I agree with you, Tom, that there are some legitimate concerns about the OEB and how it is currently organized, it is not as obvious to me as it is to you that appointing utility executives as Board members is a bad idea.
Realistically, most of the expertise related to this industry is at utilities, and there are some exceptional people coming from that background. Three of the four current appointments are utility-side people, and the elevation of Marika Hare to Vice-Chair should be added to that, as she also had a long utility experience before joining the Board in a senior staff position (and later member). That should not be seen as unusual. Past appointments have also been drawn heavily from those with utility experience, and frankly I don’t see how that can be avoided.
I think it is also true that those with a utility background do not necessarily have a pro-utility bias. Some of the fairest and most objective Board members, including Ms. Hare, Emad Elsayed, and others, come from utilities. In addition to their expertise, they also know how things really work inside utilities, so their decisions reflect a more intimate and subtle understanding of utility actions.
Add to this the fact that, for the first time, a senior consumer advocate, Peter Thompson, will be appointed (Allison Duff had also done some work on the consumer side, of course), and I think overall these appointments will be a step in the right direction.
There is an obvious question about the appointment of Susan Frank, but I think it is slightly different than the one you have raised. Ms. Frank was the architect of the recent Hydro One Distribution application that was so thoroughly criticized by the Board. There are interesting optics involved in so quickly appointing that person to the Board. On the other hand, Ms. Frank is smart and knowledgeable, and like many utility people appointed in the past, may well turn out to be an inspired choice. She will, of course, be excluded from Hydro One decisions for a while, but in the meantime there is at least the potential that she could do a lot of good, protecting the ratepayers from a superior base of expertise.
There are other reasons to be concerned with the independence and strength of the OEB, including in particular the increased emphasis on part-time members, but these specific appointments appear to me to be a net positive, not a negative.
Jay, You are not correct about Peter Thompson being the first intervenor representative appointed to the Board. Carl Wolf was one previous example. Carl was a former executive of Union Carbide and had been on the Industrial Gas User’s Association board of directors.
Considering the full slate of members of the OEB, the amount of experience with utility operations outside of Ontario is relatively limited. A little more cross-fertilization would seem beneficial.
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