With the passage of Ontario’s Green Energy Act last year, the electricity sector took a sharp turn in the direction of green economics and rethinking the boundaries between policy and regulation. The impacts on the system are being felt from one end to the other. Other provinces and other countries are watching closely to see what works well and what doesn’t, as they consider their own bold steps in similar directions. In fact, clarifying how the role of regulators ought to evolve in relation to public policy and vice versa has become a central debate of our time. Very few people think regulators can be fully independent of public policy, yet independence is a key quality of credible regulation. There is little doubt that policy makers and regulators will be expected to do more than ever to ensure that energy development supports broader public objectives in terms of economic efficiency and environmental protection, and possibly in other areas as well.
Exactly how the regulators will deal with these changing expectations is an open question that invites another, broader question: Whether society has in effect begun a significant long-term transformation process affecting much more than just electricity.
Of course the electric system, the regulatory system, and the public policy constructs around them, are all evolving together. It is perhaps a touch ironic that regulators, who are largely responsible for stabilizing the system, are being asked to deal with substantial change themselves. Part of the change they are seeing is dictated by the legislation, but to a great extent, regulators are identifying need for change themselves, and finding new ways to reflect current sensibilities in how they operate.
One of the concerns that’s highest in the minds of electricity sector participants is that the regulatory system itself continue to be a known quantity – dependable, predictable, and subject to long-lived principles of operation. Squaring that with the need to respond to new expectations has created a serious challenge for regulators and those who work with them, to find reasonable, solid and steady avenues for self-transformation. How to accommodate the need for relatively rapid change, while fostering confidence and regulatory certainty?
Generators and anyone concerned with the operation of the energy system are well-advised to watch developments in the regulatory sphere closely, compare notes with their colleagues, and to make their concerns known as new rules and practices are developed. With this issue of IPPSO FACTO, APPrO tries to enrich and encourage such discussions. As the second in the series of special features in this area, APPrO presents on the following pages four papers by recognized authorities in the field. (See also “The changing face of Regulation,” IPPSO FACTO special feature, January 2009.)
In the papers ahead readers may find themselves asking a number of fundamental questions. Is regulatory independence being unduly limited by increasingly definitive obligations on regulators to reflect government policy? Or are those obligations the natural consequence of evolution in public policy, changes that will in fact help regulators to transition more quickly into new policy frameworks? Are governments taking control over areas that should more appropriately be left to regulation, or is regulation itself in need of a re-think in relation to policy? As a leading example, is Ontario temporarily forgoing the benefits of a more competitive system in its effort to expedite the achievement of a greener supply mix? Or is the stimulation of indigenous green industry the best insurance of future prosperity? In either case, are the latest changes actually maximizing the environmental performance of the system, and are they sustainable?
These questions can sometimes be rolled together with broader concerns about political intervention and government expansionism. However, such open-ended debates are beyond the scope of an energy journal and are not the subject of the papers that follow. To keep the challenge manageable, our inquiry is limited to what works best in the energy sector.
Regulators spend a lot of time protecting consumers but they also try to make sure investors have a dependable business climate, partly by ensuring that regulatory decisions adhere to long-term principles. Participants in the energy sector clearly hold diverse views on how seriously Ontario, and indeed other jurisdictions, are impacting this climate and potentially interfering with one of the key mechanisms needed to finance the transition to greener power. No doubt many are asking: Are these jurisdictions in the midst of a fundamental rebalancing of power between government and regulators? If so, what is known and what can be said about the long term consequences of such a change?
Such questions need to be viewed in an historical perspective. No doubt many are asking whether these modifications represent only a phase, the latest swing of the policy pendulum, or are we seeing a permanent paradigm shift? Either way, the consequences are significant.
To further explore these questions, IPPSO FACTO invites input from you, our readers, whether you are generators, experts in law or finance, market participants, regulators, or interested observers of the sector.
The articles that follow demonstrate how a range of experts see the Green Energy Act affecting the regulatory function, governance in general, and what the implications are for further evolution of the sector. All while bearing in mind that regulators will need to be ever more confidence-inspiring and reflective of our changing society as they grapple with what appears to be an increasingly profound, continually-evolving set of challenges.
— Jake Brooks, Editor
In this issue of IPPSO FACTO, APPrO presents the writings of a range of noted experts on the field. Just click on one of the links below for access:
Regulatory Independence: The Impact Of The GEA On The Regulation Of Ontario's Energy Sector By Robert Warren, Weir Foulds, LLP
Ontario Green Energy and Green Economy Act, 2009: Implications for Regulatory Independence. By Ian Mondrow, Macleod Dixon LLP
Are We in a Post-Regulatory State? By George Vegh, McCarthy Tetrault, LLP
A Rational framework for electricity By Jan Carr, Past CEO of the Ontario Power Authority
The value of policy stability in the renewable energy sector By Guy Holburn, University of Western Ontario
Heat waves and blackouts: Here’s the fix By Jatin Nathwani, University of Waterloo
Please note that the opinions expressed in these articles represent the views of the authors and may or may not bear any relationship to the views and positions of APPrO.