The Potemkin PUB
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The Potemkin PUB
The Illusion of Independent Energy Regulation in NL
In politics, how you do something is as important as what you do.
Take the changes to the Public Utilities Board as a good example.
Broadly speaking, the PUB regulates two groups of things. One is energy – gas price “regulation” and domestic electricity rates. The other is broadly consumer-oriented like motor vehicle insurance. The PUB actually deals with eight different pieces of legislation including the Public Utilities Act itself that governs the Board.
This leads to an interesting reporting relationship. The PUB is accountable to Cabinet and the House of Assembly through the justice minister. But the work it does covers the responsibilities of the energy minister and the government services minister.
Last year, the trio announced a review of the Board. Well, two, actually. One was a review of gas price regulation. The other was essentially a look at how the machinery of the Board works. All internal and technical - supposedly - and until one day last week entirely secret. On that one day, the rest of us found out about what was going on and the House approved the law before anyone had a chance to see what was up. That’s the splendidly anti-democratic way things are in Newfoundland and Labrador these days.
The gas prices review is still out there. Request from the Service NL minister a year ago. Work started in January. No sign of when it will be done. What’s important here, though, is what the review is about. Not about why government regulates petroleum prices but how it works. That’s important because - as regular readers know - the consultation document released earlier this year actually shows that the price “regulation” actually doesn’t do anything at all. It mimics the market. It’s a waste of time.
That would lead any reasonable person to do away with regulation altogether. Since gas price “regulation” causes politicians incredible pain – the public blames government for rising prices even though the whole thing is a sham - you’d think any sensible politician would just use a regular review as a good reason to finally chuck the whole mess onto the trash heap of bad ideas. But government in Newfoundland and Labrador seldom involves what’s reasonable or sensible, so they are playing around with how to run the charade better, all guided by an external consultant.
Last week’s changes did prompt some criticism from the opposition but their strikes were weak. The questions posed during what passed for debate on Second Reading sounded like the politicians didn’t know basic things about electricity regulation, which was likely true. Not their fault, though. Most people don’t. Politicians know as little as the average person does and in this case the government - who’d had the thing for months in secret - only gave the other crowd the proposed changes the morning of the debate. They do that with *every* bill these days, as if the opposition could figure out in a few hours what the guv’mint crowd have been scheming over for upwards of a year.
The government these days is the most unaccountable, most anti-democratic one in recent memory. Given we started the current political period with a guy who wanted to get rid of free speech in the House, that’s saying something. Today’s crowd are perfectly in line with the evolution since 2003 though. That’s what Bill 34 - the PUB amendments - really shows.
Think back to Bill 29. Restricted the public’s right to and ability to access information the government has. Not the result of the *public* part of the consultation but in almost every clause, and certainly in all the hideously bad ones, purely the result of delivering solutions to bureaucratic and political complaints about the public’s right to know what’s going on with their money.
The public uproar over Bill 29 that led ultimately to the reforms in 2015 came about only because people had a chance to look at the changes and figure out what they did and did not do. The opposition had time to delay the vote and raise concerns, alert the rest of us. or to be a bit more accurate for some of us outside to wake up the the bunch on the Hill, some of whom actually wanted initially to go along with the Government scheme. As it was, the government used its majority to force the thing through but the outcry became so strong that the Pea Seas had to review the Act earlier than usual. The result was the current access law that is one of the best in the country.
Here's the thing, though: if Bill 29 came to the House this fall with this crowd running the place, the government would ram it through in less than three hours. It would be law before anyone figured out what happened. That’s not an accident. Not at all.
The government crowd *deliberately* make it nearly impossible for anyone to figure out what the government is doing before they do it. The politicians and bureaucrats who do this mean what they do, not what they say, which is always that they are angels and are the most open folks anywhere. Bullshit. They rob people of the ability to speak when it matters, to give informed consent, to participate meaningfully in their own government.
Look at the PUB Bill in some detail.
Broadly, there are three areas of change. We will take them in order:
Expansion of the energy policy of the province
Cabinet power to order the Board to hold a bearing, and
Changes to the Board’s size and the Chairman’s powers.
New Electricity Policy
Right away you are into a major problem. Supposedly a Bill with just some minor technical amendments, the guv’mint crowd made a big deal of what they called an “expansion” of the province’s electricity policy. Major changes of policy are not just minor, administrative and technical. Never. This one certainly isn’t.
The Bill added a few words to one subsection of the very big section in the Electrical Power Control Act, 1994 that tells the Public Utilities Board what it should consider when setting rates. The new words are in italics.
It is declared to be the policy of the province that… all sources and facilities for the production, transmission and distribution of power in the province should be managed and operated in a manner… that would result in power being delivered to consumers in the province at the lowest possible cost, in an environmentally responsible manner, consistent with reliable service….
Now there’s a bit of a story here, so walk through it. The Electrical Power Control Act, 1994 used to contain the provincial government’s electricity policy. Used to. All that changed in 2012 when the Pea Seas bought in Muskrat Falls.
The EPCA, 1994 was originally part of a package that was supposed to include privatizing Newfoundland and Labrador Hydro. The idea was to keep control of the electrical system in government’s hands but let the private sector do the work. The Public Utilities Board was supposed to be the arms’ length regulator.
As then-Premier Clyde Wells told the House repeatedly in early 1994, “this legislation will … put in place transparent, clear, objective, independent, management regime of the hydro power resources of this Province to enable distribution companies to get access to the power that we need to meet our own demand.”
In December 1995, he said it again, in the context of some changes needed once government abandoned plans to privatize the hydro corporation. It set up the hydro corporation as if it were a private company complete with a board of directors with the power to hire the chief executive.
The “sole purpose of this bill [to amend the EPCA, 1994 was] to place the laws of the Province's Electrical Power Control Act, and the Hydro Corporation, managed and owned by the people of this Province, … in a position so [the resources will be managed] effectively and efficiently. That is the sole purpose, and in placing Hydro under the regulatory control of the PU board along with the other utilities, which is what the bill provides for, it is inappropriate that Hydro be left with the absolute right to develop all remaining power [in the province]. Those powers go back to the government where they were before that legislation was passed. It is an eminently sensible and sound management approach, and that is the sole reason for it.”
Wells left politics a few weeks later and by December 1999, the government policy changed entirely. Rather than let the Public Utilities Board do all the things it was supposed to do according to the EPCA, 1994, Cabinet slowly put the old hydro corporation policy back in place.
In December 1995, Roger Grimes introduced an amendment to the EPCA, 1994 that allowed Cabinet to exempt any project they wanted from the PUB’s jurisdiction. He explained the way things were: “The changes in the Electrical Power Control Act [in 1995] basically structured Hydro not as a public utility any more, but considered it to be a commercial entity, whereby the overriding concern was that Hydro was instructed, under the Electrical Power Control Act, to take decisions that would reflect in the best possible bottom line as if it were a private company.”
Then, he said something interesting to justify giving Cabinet the power to take projects away from the PUB. “The Public Utilities Board was instructed to only permit the lowest cost option to come on stream, because it was considered to be a private environment, a private sector operation, and therefore profitability and lowest cost were to be the only considerations.” we’ve added the italics here to highlight some words.
Grimes gave a couple of examples, including a plan at Corner brook to use waste wood, bark, and sawdust to make electricity. Grimes claimed the EPCA, 1994 did “not give the government even an opportunity to consider the combined effect of securing an industry and providing energy. Because right now the act says you can only consider it if it goes through the PUB and if it is judged after full examination to be absolutely the lowest cost.”
That’s an interesting claim because it isn’t true. You can read the entire power policy section for yourself. It’s huge. Lots of talk about efficiency, fairness in access, financial soundness, economic development, declaration of essential employees, emergency powers, and so on. It prohibits the use of nuclear power.
3. It is declared to be the policy of the province that
(a) the rates to be charged, either generally or under specific contracts, for the supply of power within the province
(i) should be reasonable and not unjustly discriminatory,
(ii) should be established, wherever practicable, based on forecast costs for that supply of power for one or more years,
(iii) should provide sufficient revenue to the producer or retailer of the power to enable it to earn a just and reasonable return as construed under the Public Utilities Act so that it is able to achieve and maintain a sound credit rating in the financial markets of the world,
(iv) should be such that after December 31, 1999, industrial customers shall not be required to subsidize the cost of power provided to rural customers in the province, and those subsidies being paid by industrial customers on the date this Act comes into force shall be gradually reduced during the period prior to December 31, 1999, and
(v) should promote the development of industrial activity in Labrador;
(b) all sources and facilities for the production, transmission and distribution of power in the province should be managed and operated in a manner
(i) that would result in the most efficient production, transmission and distribution of power,
(ii) that would result in consumers in the province having equitable access to an adequate supply of power,
(iii) that would result in power being delivered to consumers in the province at the lowest possible cost consistent with reliable service,
(iv) that would result in, subject to Part III, a person having priority to use, other than for resale, the power it produces, or the power produced by a producer which is its wholly owned subsidiary,
(iv.1) that would result in open, non-discriminatory and non-preferential access to, interconnection with and service on the integrated electric system,
(v) where the objectives set out in subparagraphs (i) to (iv) can be achieved through alternative sources of power, with the least possible interference with existing contracts,
and, where necessary, all power, sources and facilities of the province are to be assessed and allocated and re-allocated in the manner that is necessary to give effect to this policy;
(c) in the event of an emergency arising from the loss of use of generating facilities, a shortage of water or a loss of transmission or distribution facilities which results in there being insufficient power to meet the needs of consumers in the province, or a part of the province, the emergency controller should have the responsibility and authority to
(i) determine priorities,
(ii) allocate and re-allocate available power, and
(iii) make all other necessary provisions for the supply and distribution of power for so long as the emergency continues;
(d) the public utilities board shall have the right to determine if, and the extent to which, employees of retailers are essential employees;
(e) [Rep. by 1995 c37 s15]; and
(f) planning for future power supply of the province shall not include nuclear power.
The bit Grimes is talking about is in bold just so you can see what it is and where it is in the whole section. Notice that it doesn’t say lowest cost option. It says lowest cost “consistent with reliable supply.” That could mean something other than the cheapest. There are also other sections that could have been used to cover off projects like a co-generation one that would affect only Kruger’s operation at Corner Brook.
Put all that to one side. Let’s assume Grimes was right. Grimes never discussed why insisting that using the lowest cost option was a bad thing. Remember that the goal of the policy was to give homeowners and businesses in the province reliable access to electricity at the at the lowest cost consistent with reliable supply, while at the same time ensuring the companies involved got a fair return for their investment. Letting companies do what they wanted, regardless of cost doesn’t make any sense.
Grimes used the example of INCO that, at the time claimed it would need 200 megawatts of new generating capacity. He complained the government couldn’t just put out a call for new generation “no matter what the cost.” But everyone would agree, Grimes said that there will be times when “ for continued social development or continued economic development, that we need to be able to consider something [else], even though it might be marginally a little higher in cost than some other options.”
What makes Grimes’ comments stand out in hindsight is that we have precisely the same rationale used now by his success as energy minister - Andrew Parsons - for the latest change to power policy of the province. Parsons used many of the same examples, including Corner Brook’s co-generation. Parsons didn’t explain why the government could not just exempt whatever projects he had in mind from the PUB, which was the point of the 1999 changes. Instead, the government just added a few words to that one clause to allow another consideration.
Scroll back and look at the power policy. You’ll notice it allows alternate sources for generation, things like solar, wind, bio-generation, and so on. Both grimes and Parsons either misunderstood or misrepresented the EPCA, 1994’s policy section. Doesn’t matter whether they did it themselves or officials gave it to them or even the PUB did originally. What’s important is that both in 1999 and in 2023, the misstatement of what the words meant is being used to cover something else.
That something else in 2023 is the plan to use electricity rates to subsidise the Stephenville and other wind and hydrogen megaprojects. The changes made to that section of the EPCA, 1994 actually change the meaning of the sentence. it now makes “lowest cost” one of three criteria in that section along with “reliable service,” and “environmentally responsible.”
As Parsons explained it last week, this would allow the PUB to approve an expensive project, provided it was environmentally responsible. Interestingly enough, though, there’s no definition for that term in the amendment. Instead, the amendment bill passed last week gives Cabinet the power to define terms that aren’t already defined in legislation.
Since Cabinet decided to amend the Act in the first place, it’s hard to imagine they merely overlooked the crucial definition in their new power policy. The omission was deliberate. Instead, Cabinet allowed itself to make the definition later, in secret and only tell the rest of us by regulation, without having to bring it back to the House for debate and approval.
As a last point, Parsons talked a fair bit last week about this “lowest cost” section of the Act and how it stopped us from having wonderful wind power before now. Two reasons that’s not even vaguely true. First, we didn’t need wind and still don’t. There was plenty of electricity on the island and if we needed more, there were small hydro projects to deliver it.
Second, the government imposed a moratorium on wind energy and small hydro because moratorium because both undermined the argument for Muskrat Falls. Had precisely nothing to do with the EPCA, 1994 at all, as Parsons ought to know. if he cannot remember, he can always go back to the Bond Papers explainer from early 2022 about the government’s confused wind energy policy. He can also check Danny Williams’ 2007 energy policy - the Muskrat Falls policy rationalisation - which is still on the books, despite being disappeared from the energy department’s website.
The Power to Order a Hearing
Bill 34 gives Cabinet the power to direct the PUB “to hold an in-person hearing.” That’s it. On the face of it, there’s no major issue here. The words on the page do not give Cabinet the power to tell the Board *not* to hold a hearing as some claim.
The problem here is that this is just one more way that Cabinet interferes with the PUB contrary, contrary to what the Electrical Power Control Act, 1994 intended. The EPCA, 1994 and the Public Utilities Act set up the PUB as an agency at arms length from government. Some of the politicians last week kept referring to the PUB’s independence. Theoretically, it is independent. It ought to be independent in the same way other regulators are across Canada. Except, the PUB isn’t.
In 2012, the Pea Seas introduced section 5.2 of the EPCA, 1994, to give cabinet wide powers to direct the Board about Muskrat Falls. That demolished any pretence of independence in the Board the numerous exemption orders hadn’t already done. It’s still on the books. There’s no plan to change it. Rather than mitigate the impact of Muskrat Falls on the way the Board regulates electricity, this government took this amendment – as minor as it seems – that merely expands the ways government has been screwing with effective electricity regulation since 1999.
To be fair, this bunch doesn’t apparently intend to give Cabinet the power to shut down a planned public hearing by the PUB. Then again, in 1995, the guy at the top then likely never expected that as soon as he was out the door, his reforms would vanish as rapidly as they did. In itself, the change is small bordering on meaningless and in the many ways Cabinet and the bureaucracy control the PUB, it’s just bizarre to think that giving Cabinet *more* power to screw with it openly somehow will make the Board work properly. Plus it’s easily amended by a future government to let Cabinet tell the PUB not to have a hearing.
More Commissioners. More Temporary Commissioners.
Since the government types did this review of the Board in secret and amended the legislation with a rubber stamp, there’s no way of knowing where the idea came from to add more permanent commissioners to the Board and to give the Chair the power to appoint temporary Commissioners.
There might be a lot of work they cannot get to. As it is now, the Board of four can form itself into different two person groups and handle several projects simultaneously. Adding a couple of permanent commissioners – with the same quorum limit of two – might let the Board take on more work. Adding an unknown number of commissioners on a six-month basis would certainly adds even more ability, provided, of course, there’s the staff to support all this Board business.
A few things stand out about these temp folks.
Apparently, in its history, the Board has never had a member file a dissent from the majority. In practice, then, there doesn’t seem to be any value in adding more bodies if they are likely to just carry on the same practice and go along with whatever the majority decides. The temps are unlikely to dissent at all since they depend for their hobble on pleasing the Chair, who has the power to appoint and re-appoint.
If the Board is to be independent, then it seems odd that all these temps have to be approved by the Minister to which the Board reports. That makes it pretty clear these added jobs are not about efficiency and effectiveness. They’re about something else but what that is would be anyone’s guess.
What these sorts of things can turn into, of course, are nice little hobbles for friends of the Board chair and the Minister. What’s likely to be the case even more is that the appointments become another carrot to dangle in front of the relatively small pool of lawyers, accountants, and engineers in the province. If you’re an ambitious person looking for a side hustle or something that will add to your resume when you apply for a better job - like being a judge - being a PUB commissioner looks pretty spiffy.
Since the PUB doesn’t tolerate contrarians any more than our political society does generally, this is just another way to discourage people from taking on cases related to the Board, especially for the controversial hearings where you might find people opposing the government looking for counsel. Might not be the intention, but this very much will add another thumb to the scale weighing against full, open hearings using local professionals on both sides. Newfoundland is a pretty small town and the Board of Trade is an excellent example of the kind of weak-kneed “advocacy” we get from the local business and professional community when friends and business partners are also politically connected.
Last week’s bill that changed the law affecting electricity regulation and the Public Utilities Board may not look like Bill 29 - the infamous attack on the public’s right to know - but in many ways it reflects the same way of thinking about what government does and about how our democracy works.
In themselves, the changes reinforced many bad trends that have been going on for some time rather than bring the sort of transformative change Premier Andrew Furey likes to talk about. “We have been here trying to implement a new policy, Mr. Speaker, to create a sustainable Newfoundland and Labrador,” Furey said last week while defending the government’s decision to hire expensive outside lawyers to fight a claim by parents of a deaf child over the services the child received in school.
It’s a generic line. A phrase as meaningless as any other Fureyism. Like his claim when asked about the government’s bungling of computer security in health care that there’s “no perfection in uncharted waters.”
In this case, as in pretty well everything else, the current government is just building on the polices of its Pea Sea predecessors, which, in the case of electricity policy expanded on the convoluted policy that’s grown up since 1996. This latest one will set up for another pet government project being pushed through as hastily as possible, using what amounts to a sham public oversight body.
The major difference between 2023 and 2012 is that 11 years later, the people inside government aren’t making the same mistakes their predecessors made with Bill 29 or with Muskrat Falls, at least as far as letting people see what is going on before it happens is concerned.
The politicians and bureaucrats learned from the past. They just learned very different lessons than the rest of us did as keep to the course charted all those years ago.