Published On: Monday, 05 June 2017

Canadian Public Utility Providers Facing Legitimacy Crisis

Canadian Public Utility Providers Facing Legitimacy Crisis

- The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies through research that is nonpartisan, evidence-based and subject to definitive expert review.

CANADA - Canada’s public utility regulators, in sectors ranging from energy to telecommunications, are facing a crisis of legitimacy because they promise more than they can deliver and do not deliver what they should, according to a new report from the C.D. Howe Institute.

In "Defining the Public Interest in Regulatory Decisions: The Case for Economic Efficiency", author Jeffrey Church argues it is time that governments across Canada refocus regulators.

“Canada’s public utility regulators, such as the National Energy Board, are under attack,” says Church. “Regulators and their decisions have been subject to withering commentary, hostility, disbelief, contempt and even disobedience.”

According to the author, these problems arise because legislation does not clearly articulate the purpose of the regulator. He further argues that the goal of regulation should be to maximize the value of production from Canada’s scarce resources, its land, natural resources, capital, and labour—in other words, “economic efficiency.” Unfortunately, this is usually not the case.

To address this widespread issue, the author urges governments across Canada refocus regulators with an explicit sole mandate to improve economic efficiency.

“Too many governments provide regulators with a vague mandate to act in the public interest, or multiple, often conflicting objectives. That leaves regulators with far too much latitude to be influenced by lobbying, profit seeking, and political influence,” comments Church.

Similarly, to minimize the potential for exchanges between politicians and special interest groups involving favourable policy in return for cash and votes, it is important that governments delegate regulatory decisions to independent regulators that are guided by an efficiency mandate, and not leave regulatory decisions to politicians.