A potentially influential series of recommendations for improving the governance of key organizations in the electricity sector was released in October. The publication, titled “A Guide for Governance of the Electricity Sector in Canada,” is the result of an extensive consultation process amongst a wide range of policy and governance experts in the energy sector. Although some of the recommendations may prove controversial, they are quite likely to provoke serious consideration in both business and in government.
The report built on conference discussions and related research initiated by Professor Guy Holburn of the Ivey School of Business, University of Western Ontario and the Council for Clean and Reliable Electricity, chaired by Glen Wright. It contains a series of substantive recommendations for improving the governance of agencies and boards in the electricity sector as well as the governance of crown corporations.
According to the report, “research suggests that governance issues have as much of an influence on utility operations and performance as do regulatory policies.”
After publicly circulating the report, a broad range of sector stakeholders were surveyed on their views of which of the listed policy recommendations were especially important. A central finding is the overwhelming support for strengthening the independence of regulatory agencies and boards: 93% of survey respondents rated as highly important the recommendation that “The principle of independence of agency decision-making should be formally stated in legislation.”
The second and third highest priorities identified by respondents are “Major policy objectives should be specified in legislation rather than in directives” and “Agency board members should be appointed for fixed, five year terms, with renewal limited to one additional term of five years.”
Survey respondents’ top three priorities for reforming the governance of crown corporations are as follows:
1. The government’s ownership function and other functions, such as market regulation and industrial policy, should be clearly separated to avoid a conflict of interest.
2. Utility senior management should be able to make operational decisions without obtaining prior government approval.
3. Utility boards should formulate and review corporate strategy in light of the utility’s overall objectives, establish performance indicators, identify key risks, monitor disclosure and communication, ensure the reliability of financial statements, assess managerial performance and develop succession plans for key executives.
Key individuals who drove the governance project forward and contributed to the report included Glen Wright, Chairman of the Council for Clean and Reliable Electricity; Guy Holburn, Director, Energy@Ivey, from the Richard Ivey School of Business, University of Western Ontario; Jatin Nathwani, Executive Director of the Waterloo Institute for Sustainable Energy, at the University of Waterloo; and Jan Carr, the first CEO of the Ontario Power Authority.
Copies of the report and further information are available at http://blogs.ivey.ca/energy/research.
The final report is available at this location: